Tag Archive | "New Classical"

Monetary Policy and Economic Policy

There is widespread agreement that monetary policy matters,but there is disagreement about how it should be conducted. Behind this disagreement lie differences in theoretical understandings. The paper contrasts the New Classical, Neo-Keynesian, and Post-Keynesian frameworks, there by surfacing the differences. The New Classical model has policy only affecting long run inflation. The Neo-Keynesian has policy impacting  inflation, unemployment, and real wages. The Post-Keynesian model also impacts growth, so policy implicitly picks a quadruple. Inflation targeting is a sub-optimal policy frame because it biases decisions toward low inflation by obscuring  the fact that policy also affects unemployment, real wages, and growth.

  Monetary Policy and Economic Policy (236.1 KiB, 7,306 hits)

Posted in Economics, Issue no. 2