A Post-Keynesian macroeconomic policy mix as an alternative to the New Consensus approach

Eckhard Hein and Engelbert Stockhammer

No 10-2007, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: In a Post-Keynesian (PK) model we show that inflation targeting monetary policies, as the main stabilisation tool proposed by the New Consensus Model (NCM), in the short run are only adequate for certain values of the model parameters, but are either unnecessary, counterproductive, or limited in their effectiveness for other values. Taking into account medium-run cost and distribution effects of interest rate variations renders monetary policies completely inappropriate as an economic stabiliser. Based on these results we argue that the NCM macroeconomic policy assignment should be replaced by a PK assignment. Enhancing employment without increasing inflation will be possible if macroeconomic policies are coordinated along the following lines: The central bank targets distribution between rentiers, on the hand, and firms and employees, on the other hand, and sets low real interest rates, wage bargaining parties target inflation and fiscal policies are applied for short- and medium-run real stabilisation purposes.

Keywords: Macroeconomic policies; New Consensus Model; Post-Keynesian Model; inflation targeting (search for similar items in EconPapers)
JEL-codes: E12 E50 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2007
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pke
References: Add references at CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.boeckler.de/pdf/p_imk_wp_10_2007.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:10-2007

Access Statistics for this paper

More papers in IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute Contact information at EDIRC.
Bibliographic data for series maintained by Sabine Nemitz ().