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A Critique of the New Consensus View of Monetary Policy

Published online by Cambridge University Press:  01 January 2023

Peter Kriesler  and
Marc Lavoie
Marc Lavoie
Affiliation:
University of New South Wales and University of Ottawa, respectively
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Abstract

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This paper seeks to look at the underlying framework of the New Consensus models of macroeconomic policy for inflation and unemployment, providing a post-Keynesian critique. In the light of this critique, the model is reformulated, with its basic structure intact, but with alternate post-Keynesian specifications of the Phillips curve being considered. It is shown that such modifications, either allow a long run trade-off between the rate of inflation and the level of output, the rate of capacity utilisation and, therefore, unemployment, or, in our preferred specification, changes in output and capacity have no implications for inflation over a large range of capacity utilisation. In either case, macroeconomic policy is restored to its role in maintaining full employment.

Type
Symposium on Monetary and Fiscal Policy in Theory and Practice
Information
The Economic and Labour Relations Review , Volume 16 , Issue 1 , July 2005 , pp. 7 - 15
Copyright
Copyright © The Author(s) 2005

Footnotes

*

We wish to thank Mario Seccareccia, John Nevile and anonymous referees for their helpful comments.

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