Re-examining Monetary and Fiscal Policy for the 21st Century
'This is an incisive analysis explaining why the conventional wisdom regarding the role of monetary and fiscal policy has failed to create a full employment economy for European nations. This is followed by a thoughtful examination of how the nations of Euroland can achieve a prosperous economy through the proper use of fiscal and monetary policies. A must read for policymakers, economists and concerned citizens.' - Paul Davidson, Journal of Post Keynesian Economics and New School University, New York, US 'Philip Arestis and Malcolm Sawyer offer us an accessible, insightful account of the major issues in current macroeconomics. No one reading his book will doubt the poverty and incoherence of the modern orthodoxy, nor the sad results, especially in underachieving Europe. Nor can one escape the urgent case for the new departures to which the authors have provided this excellent guide.' - James K. Galbraith, University of Texas, Austin, US This book provides a much needed re-examination of monetary and fiscal policies, their application in the real world and their potential for macroeconomic policy in the 21st century. It provides a detailed discussion and critique of the 'new consensus' in macroeconomics along with the monetary and fiscal policies encapsulated within it.
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The new consensus in macroeconomics and monetary policy
The macroeconometric model of the Bank of England
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aggregate demand approach Arestis argued argument assets bank deposits Bank of England Bernanke budget deficit capacity utilization capital stock cent central bank channel Chapter consensus constraint context countries debt demand for money discount rate discretionary fiscal policy economic activity endogenous money equations 2.1 equilibrium rate euro area European example exchange rate fiscal policy full employment functional finance hence impact implication income increase inflation barrier inflation rate inflation targeting inflationary interest rate parity Keynesian labour market level of aggregate level of economic level of employment loans long-run macroeconometric models macroeconomic ment monetary policy money supply NAIRU natural rate nominal output gap p-curve Phillips curve price stability rate of inflation rate of interest rate of unemployment real rate real wage relationship relative relevant Ricardian equivalence role savings and investment Sawyer shocks significant stock of money supply-side equilibrium Taylor rule thereby transmission mechanism variables zero