Philip Arestis

Economic policies after the New Consensus Macroeconomics

24 Seiten · 3,77 EUR
(Juni 2011)

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Introduction:

Philip Arestis develops a theoretically founded proposal for "Economic policies after the New Consensus Macroeconomics". Recalling that the NCM, along with its policy implications, has been heavily criticised at FMM network conferences and elsewhere, the main purpose of this contribution is to discuss economic policies that could potentially replace the NCM ones. The alternative perspective in terms of economic policies advanced here is summarised by the author as follows: Use fiscal policy in the short term and in the long term to address demand issues. Interest rate policy should be such that the real rate of interest is in line with the trend rate of growth in the economy. But above all, coordination of fiscal and monetary policies should be pursued. The central bank?s objective should be financial stability. Major central banks? cooperation and intervention in the foreign exchange market is necessary to control the exchange rate. Employ regional and industrial policies to create the required capacity. The author?s analysis of inflation and its relationship to growth implies that inflationary pressures should worry economic policy makers only when they are substantial. When inflation reaches such high rates a relevant economic policy suggestion is to develop incomes policy to contain such serious inflationary pressures.