The Macroeconomics of Industrial Strategy

Philip Arestis and Malcolm Sawyer ()

Economics Working Paper Archive from Levy Economics Institute

Abstract: This paper explores some of the links between macroeconomic policy and industrial strategy. The perspective of the present paper is to emphasis the role of the output and investment activities of enterprises rather than the general focus on the labour market in the determination of economic performance. We have explore this aspect in some detail in connection with the inflation barrier, and argue that such a barrier should be viewed in terms of a lack of capacity. We briefly review the balance of trade constraint on growth and employment. The over-all implications of those two sets of analyses is that macroeconomic performance would be enhanced by appropriate industrial strategy, and that inappropriate macroeconomic policies will damage industrial performance. Policies designed to restrain inflation by lowering the level of aggregate demand will tend to depress investment and harm capacity. Improved industrial performance requires a climate conducive to investment and research and development, which in turn depends on, inter alia, high and stable levels of aggregate demand.

Date: 1998-06
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Citations: View citations in EconPapers (2)

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Working Paper: The Macroeconomics of Industrial Strategy (1998)
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