Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105893
Authors: 
Hein, Eckhard
Stockhammer, Engelbert
Year of Publication: 
2007
Series/Report no.: 
IMK Working Paper 10/2007
Abstract: 
In a Post-Keynesian (PK) model we show that inflation targeting monetary policies, as the main stabilisation tool proposed by the New Consensus Model (NCM), in the short run are only adequate for certain values of the model parameters, but are either unnecessary, counterproductive, or limited in their effectiveness for other values. Taking into account medium-run cost and distribution effects of interest rate variations renders monetary policies completely inappropriate as an economic stabiliser. Based on these results we argue that the NCM macroeconomic policy assignment should be replaced by a PK assignment. Enhancing employment without increasing inflation will be possible if macroeconomic policies are coordinated along the following lines: The central bank targets distribution between rentiers, on the hand, and firms and employees, on the other hand, and sets low real interest rates, wage bargaining parties target inflation and fiscal policies are applied for short- and medium-run real stabilisation purposes.
Subjects: 
Macroeconomic policies
New Consensus Model
Post-Keynesian Model
inflation targeting
JEL: 
E12
E50
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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