A new paradigm for macroeconomic policy. (10th April 2011)

• Record Type: Journal Article
• Authors: Arestis, Philip; Sawyer, Malcolm
• Is Part Of: International journal of public policy. Volume 7:Number 1/2/3(2011)
• Page Start: 22
• Page End: 39
• Publication Date: 2011-04-10
• Subjects: fiscal policy -- monetary policy -- financial stability -- budget deficits -- income distribution -- macroeconomics -- consensuses -- new consensus -- aggregate demand -- demand levels -- interest rates -- central banks -- banking -- constant rates -- real rates -- growth rates -- policy coordination -- bank independence -- public policy -- economic policies -- alternative paradigms; Political planning -- Periodicals; Public administration -- Periodicals; 351.05
• Languages: English
• ISSNs: 1740-0600

Abstract

In this paper we advocate a way of approaching macroeconomic policy, which stands in contrast to the now discredited 'new consensus in macroeconomics' policy framework. The five pillars of our approach are: the need for budget deficits to support the level of aggregate demand; full consideration of income distribution and its implications for the level of demand; the interest rate policy pursued by the central bank should aim for a constant real rate of interest with that interest rate broadly in line with the rate of growth; the coordination of economic policies with the implication of an end of central bank independence; and the key policy objective of the central bank should be financial stability.