There has undoubtedly been a major shift within macroeconomic policy over the past two decades, f... more There has undoubtedly been a major shift within macroeconomic policy over the past two decades, from the pre-eminence of fiscal policy to that of monetary policy. The latter has gained considerably in importance as an instrument of macroeconomic policy, whereas the former is rarely mentioned in policy discussions anymore, except in the
The Labour government elected in May 1997 came into office stressing that it was ‘New Labour’ and... more The Labour government elected in May 1997 came into office stressing that it was ‘New Labour’ and pursuing a ‘third way’. In macroeconomic terms, the emphasis was on the avoidance of ‘tax and spend’ policies and restraints on public expenditure along with the adoption of the so-called ‘golden rule’ of public finances (as discussed below). There was something akin to a disavowal of a Keynesian approach to macroeconomic policies and specifically the use of fiscal policy to help steer the economy. There was an emphasis on labour market reforms and flexibility, which would, in effect, lower the ‘non-accelerating rate of unemployment’ and thereby lower unemployment. Whereas previous Labour governments had pursued a range of industrial and regional development policies to stimulate economic growth and lower unemployment, there was a major shift from those policies to those of labour (and to some degree product) market ‘flexibility’.
O artigo apresente o Novo Consenso Macroeconômico e discute três importantes aspectos relacionado... more O artigo apresente o Novo Consenso Macroeconômico e discute três importantes aspectos relacionados a ele: as implicações de políticas fiscal e monetária; a importância do conceito de "taxa natural de juros" para o Novo Consenso Macroeconômico; e as conseqüências quando a taxa de juros difere da "taxa natural de juros". Ademais, o papel central da curva de Phillips no Novo Consenso Macroeconômico e o controle da inflação são outros aspectos a serem analisados. Nesse sentido, o artigo apresenta a crítica da curva de curva de Phillips novo keynesiana ao foco central do Novo Consenso Macroeconômico.
The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, indep... more The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic forecasting it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad.
The financial crisis and recession have highlighted a range of problems with the 'euro project', ... more The financial crisis and recession have highlighted a range of problems with the 'euro project', but these problems and difficulties are related to some fundamental issues for the euro. The convergence criteria established by the Maastricht Treaty focused on nominal rather than real variables, failed to relate to issues such as current account positions. There are well-known difficulties of macroeconomic policies under the Stability and Growth Pact including its deflationary nature and the 'one size fits all problem' of imposing common deficit requirements on all countries. The economic performance of the eurozone countries is briefly reviewed with attention paid to the differential inflation rates; also accounted for are the changes in competitiveness as well as the current account deficits, and their implications for the future of economic performance within the eurozone, and the euro itself. The patterns of current account deficits and surpluses are linked with unemployment, lack of competitiveness and budget deficit issues. The nature of the reforms to the operations of the eurozone is examined. The political limits (including those arising from the nature of the Treaty of Lisbon) and the ideological constraints (associated with the neo-liberal agenda) on serious reforms are discussed from which the general conclusion is that the needed reforms will not be carried through. This discussion also includes consideration of the possible role for a substantial EU-level fiscal policy and some other aspects of political union. It is argued that the deep-seated problems are unlikely to be resolved, casting a dark shadow over the future of the euro.
The purpose of this contribution is to look into the fiscal and debt policies in the UK and also ... more The purpose of this contribution is to look into the fiscal and debt policies in the UK and also to discuss their future prospects. In doing so we begin with a discussion of the sustainability of deficits and debt, along with a precisely definition of sustainability. This is followed by a focused discussion of issues that relate to debt and growth, which in its turn requires a comprehensive analysis of the intertemporal budget constraint thesis. Two further relevant and important issues are subsequently addressed. These are, first, the relationship between the intertemporal budget constraint thesis and sustainability, and, secondly, its consistency with household behaviour. The sustainability of deficits and 'functional finance', structural budgets and the impossibility of balanced structural budget are then discussed. Finally, the future of UK fiscal policy is addressed before we summarise and conclude.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
The introduction of the euro-in January 1999 as a "virtual" currency, and then in January 2002 as... more The introduction of the euro-in January 1999 as a "virtual" currency, and then in January 2002 as a "real" currency-has been a significant step in the integration of the economies of the countries that form the European Union (EU), and, more notably, for the 12 countries that have so far adopted the euro and created the Economic and Monetary Union (EMU). The adoption of the euro has not only meant that a single currency now prevails across the euro zone with reduced transactions costs for trade between member countries. It also has meant that the euro has become embedded in a particular set of institutional and policy arrangements that tell us much about the nature of economic integration occurring in the EU. In fact, the euro is a relatively small step along the path to further economic integration at the global level, and the neoliberal agenda of globalization can be clearly seen from the ways in which the euro has been introduced. The adoption of the euro can be viewed as a further step in a process of economic integration that began with the signing of the Treaty of Rome by the six founder member countries (Arestis, Brown, and Sawyer 2001, especially chapter 2). Proposals for a single currency began in earnest with the Werner report in 1970, which advocated the movement toward economic and monetary union by 1980. The European Monetary System (EMS), launched in March 1979, sought to establish monetary and exchange rate stability based on the introduction of the Exchange Rate Mechanism (ERM), which, in turn, focused on the European Currency Unit (ECU). In 1986 the EU amended the Treaty of Rome with the Single European Act and set the end of 1992 as a target date for the removal of all remaining barriers to the free flow of goods, services, and resources.
How to cite Complete issue More information about this article Journal's homepage in redalyc.org ... more How to cite Complete issue More information about this article Journal's homepage in redalyc.org Scientific Information System Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Non-profit academic project, developed under the open access initiative
The basic proposition of this paper is that the economic problems which have threatened the exist... more The basic proposition of this paper is that the economic problems which have threatened the existence of the euro have not arisen in the main through 'bad' behaviour of some member states. They rather come from 'design faults' in the construction of the euro project. These faults can be seen as present in the nature of the convergence criteria which focus on nominal rather than real variables; pay no attention to the validity of the exchange rates at which countries enter the EMU, or to the prevailing current account deficits and surpluses; nor to the differences in inflation mechanisms between countries. These 'design faults' continue with the inadequacy of a fiscal policy based on numerical targets operating at the national level. The design of the 'independent' European Central Bank has largely precluded the necessary coordination of fiscal and monetary policy, and has also disabled the central banking system from providing sufficient support to national governments and their budget deficits. It is concluded that a complete redesign of the Stability and Growth Pact and related policies is required.
The ongoing crisis of the eurozone is calling its continued existence into doubt, and raising que... more The ongoing crisis of the eurozone is calling its continued existence into doubt, and raising questions on whether it can function effectively. The view of the nature of the eurozone crisis as arising from 'design faults' of the Economic and Monetary Union and a balance of payments crisis with large current account imbalances between countries is developed. The policy remedies (in the form of the 'fiscal compact') which are being put into place will not work in their own terms and will make the economic performance of the eurozone countries worse. Some Keynesian remedies for the crisis in terms of alternative policy proposals for the operation of the Economic and Monetary Union are outlined.
Summary: This paper focuses on the future of economic policies with regard to inflation. The domi... more Summary: This paper focuses on the future of economic policies with regard to inflation. The dominant approach to inflation over the past two decades or so has been inflation targeting. The global environment of the decade circa 1995 to 2005 with the “China effect ” pushing down prices of manufactured goods and with primary commodity prices being subdued was conducive to low infla-tion. It is argued that inflation targeting has not been a great success story and is unable to address inflation arising from global forces or from struggles over the distribution of income. It is argued that a more sophisticated analysis than that contained in the Phillips curve is required. Further, and from our analysis, counter inflation policies should include the achievement of an inflation barrier consistent with full employment without inflationary pressures. This can be addressed by ensuring that there is sufficient productive capacity to underpin full employment, where sufficient is to be interp...
European Journal of Economics and Economic Policies: Intervention, 2011
Geoff Harcourt has been a thoroughgoing Keynesian committed to the achievement of sustainable (en... more Geoff Harcourt has been a thoroughgoing Keynesian committed to the achievement of sustainable (environmental and otherwise) and equitable (nationally and internationally) economic development and growth, and full employment of the available labour force. Achieving such an objective would require, inter alia, the maintenance of a high level of aggregate demand consistent with the full employment of labour, and the provision of sufficient productive capacity to enable that full employment, where sufficient is to be interpreted in terms of quantity, quality and geographical distribution. In this paper the ways in which fiscal policy should be used to sustain high levels of aggregate demand, necessary though not sufficient for full employment, are explored. Geoff has been a long-standing advocate of incomes policies to contain inflation without resorting to demand deflation. We argue that with the failures of inflation targeting, itself based on demand deflation, the need to develop inc...
A number of countries have adopted Inflation Targeting (IT) since the early 1990s in an attempt t... more A number of countries have adopted Inflation Targeting (IT) since the early 1990s in an attempt to reduce inflation to low levels. Since then, IT has been praised by most literature as a superior framework of monetary policy. We suggest that IT is a major policy prescription closely associated with the New Consensus Macroeconomics (NCM). This paper concentrates mainly on the IT aspects of the NCM. We address the theoretical foundations of IT. This is followed by an assessment of its theoretical foundations, where a number of aspects are discussed. We then turn our attention to an assessment of the empirical work on IT, where we distinguish the work that has been done utilising structural macroeconomic models, and work based in single equation techniques. The IT theoretical framework and the available empirical evidence do not appear to support the views of the proponents.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
There has undoubtedly been a major shift within macroeconomic policy over the past two decades, f... more There has undoubtedly been a major shift within macroeconomic policy over the past two decades, from the pre-eminence of fiscal policy to that of monetary policy. The latter has gained considerably in importance as an instrument of macroeconomic policy, whereas the former is rarely mentioned in policy discussions anymore, except in the
The Labour government elected in May 1997 came into office stressing that it was ‘New Labour’ and... more The Labour government elected in May 1997 came into office stressing that it was ‘New Labour’ and pursuing a ‘third way’. In macroeconomic terms, the emphasis was on the avoidance of ‘tax and spend’ policies and restraints on public expenditure along with the adoption of the so-called ‘golden rule’ of public finances (as discussed below). There was something akin to a disavowal of a Keynesian approach to macroeconomic policies and specifically the use of fiscal policy to help steer the economy. There was an emphasis on labour market reforms and flexibility, which would, in effect, lower the ‘non-accelerating rate of unemployment’ and thereby lower unemployment. Whereas previous Labour governments had pursued a range of industrial and regional development policies to stimulate economic growth and lower unemployment, there was a major shift from those policies to those of labour (and to some degree product) market ‘flexibility’.
O artigo apresente o Novo Consenso Macroeconômico e discute três importantes aspectos relacionado... more O artigo apresente o Novo Consenso Macroeconômico e discute três importantes aspectos relacionados a ele: as implicações de políticas fiscal e monetária; a importância do conceito de "taxa natural de juros" para o Novo Consenso Macroeconômico; e as conseqüências quando a taxa de juros difere da "taxa natural de juros". Ademais, o papel central da curva de Phillips no Novo Consenso Macroeconômico e o controle da inflação são outros aspectos a serem analisados. Nesse sentido, o artigo apresenta a crítica da curva de curva de Phillips novo keynesiana ao foco central do Novo Consenso Macroeconômico.
The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, indep... more The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic forecasting it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad.
The financial crisis and recession have highlighted a range of problems with the 'euro project', ... more The financial crisis and recession have highlighted a range of problems with the 'euro project', but these problems and difficulties are related to some fundamental issues for the euro. The convergence criteria established by the Maastricht Treaty focused on nominal rather than real variables, failed to relate to issues such as current account positions. There are well-known difficulties of macroeconomic policies under the Stability and Growth Pact including its deflationary nature and the 'one size fits all problem' of imposing common deficit requirements on all countries. The economic performance of the eurozone countries is briefly reviewed with attention paid to the differential inflation rates; also accounted for are the changes in competitiveness as well as the current account deficits, and their implications for the future of economic performance within the eurozone, and the euro itself. The patterns of current account deficits and surpluses are linked with unemployment, lack of competitiveness and budget deficit issues. The nature of the reforms to the operations of the eurozone is examined. The political limits (including those arising from the nature of the Treaty of Lisbon) and the ideological constraints (associated with the neo-liberal agenda) on serious reforms are discussed from which the general conclusion is that the needed reforms will not be carried through. This discussion also includes consideration of the possible role for a substantial EU-level fiscal policy and some other aspects of political union. It is argued that the deep-seated problems are unlikely to be resolved, casting a dark shadow over the future of the euro.
The purpose of this contribution is to look into the fiscal and debt policies in the UK and also ... more The purpose of this contribution is to look into the fiscal and debt policies in the UK and also to discuss their future prospects. In doing so we begin with a discussion of the sustainability of deficits and debt, along with a precisely definition of sustainability. This is followed by a focused discussion of issues that relate to debt and growth, which in its turn requires a comprehensive analysis of the intertemporal budget constraint thesis. Two further relevant and important issues are subsequently addressed. These are, first, the relationship between the intertemporal budget constraint thesis and sustainability, and, secondly, its consistency with household behaviour. The sustainability of deficits and 'functional finance', structural budgets and the impossibility of balanced structural budget are then discussed. Finally, the future of UK fiscal policy is addressed before we summarise and conclude.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
The introduction of the euro-in January 1999 as a "virtual" currency, and then in January 2002 as... more The introduction of the euro-in January 1999 as a "virtual" currency, and then in January 2002 as a "real" currency-has been a significant step in the integration of the economies of the countries that form the European Union (EU), and, more notably, for the 12 countries that have so far adopted the euro and created the Economic and Monetary Union (EMU). The adoption of the euro has not only meant that a single currency now prevails across the euro zone with reduced transactions costs for trade between member countries. It also has meant that the euro has become embedded in a particular set of institutional and policy arrangements that tell us much about the nature of economic integration occurring in the EU. In fact, the euro is a relatively small step along the path to further economic integration at the global level, and the neoliberal agenda of globalization can be clearly seen from the ways in which the euro has been introduced. The adoption of the euro can be viewed as a further step in a process of economic integration that began with the signing of the Treaty of Rome by the six founder member countries (Arestis, Brown, and Sawyer 2001, especially chapter 2). Proposals for a single currency began in earnest with the Werner report in 1970, which advocated the movement toward economic and monetary union by 1980. The European Monetary System (EMS), launched in March 1979, sought to establish monetary and exchange rate stability based on the introduction of the Exchange Rate Mechanism (ERM), which, in turn, focused on the European Currency Unit (ECU). In 1986 the EU amended the Treaty of Rome with the Single European Act and set the end of 1992 as a target date for the removal of all remaining barriers to the free flow of goods, services, and resources.
How to cite Complete issue More information about this article Journal's homepage in redalyc.org ... more How to cite Complete issue More information about this article Journal's homepage in redalyc.org Scientific Information System Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Non-profit academic project, developed under the open access initiative
The basic proposition of this paper is that the economic problems which have threatened the exist... more The basic proposition of this paper is that the economic problems which have threatened the existence of the euro have not arisen in the main through 'bad' behaviour of some member states. They rather come from 'design faults' in the construction of the euro project. These faults can be seen as present in the nature of the convergence criteria which focus on nominal rather than real variables; pay no attention to the validity of the exchange rates at which countries enter the EMU, or to the prevailing current account deficits and surpluses; nor to the differences in inflation mechanisms between countries. These 'design faults' continue with the inadequacy of a fiscal policy based on numerical targets operating at the national level. The design of the 'independent' European Central Bank has largely precluded the necessary coordination of fiscal and monetary policy, and has also disabled the central banking system from providing sufficient support to national governments and their budget deficits. It is concluded that a complete redesign of the Stability and Growth Pact and related policies is required.
The ongoing crisis of the eurozone is calling its continued existence into doubt, and raising que... more The ongoing crisis of the eurozone is calling its continued existence into doubt, and raising questions on whether it can function effectively. The view of the nature of the eurozone crisis as arising from 'design faults' of the Economic and Monetary Union and a balance of payments crisis with large current account imbalances between countries is developed. The policy remedies (in the form of the 'fiscal compact') which are being put into place will not work in their own terms and will make the economic performance of the eurozone countries worse. Some Keynesian remedies for the crisis in terms of alternative policy proposals for the operation of the Economic and Monetary Union are outlined.
Summary: This paper focuses on the future of economic policies with regard to inflation. The domi... more Summary: This paper focuses on the future of economic policies with regard to inflation. The dominant approach to inflation over the past two decades or so has been inflation targeting. The global environment of the decade circa 1995 to 2005 with the “China effect ” pushing down prices of manufactured goods and with primary commodity prices being subdued was conducive to low infla-tion. It is argued that inflation targeting has not been a great success story and is unable to address inflation arising from global forces or from struggles over the distribution of income. It is argued that a more sophisticated analysis than that contained in the Phillips curve is required. Further, and from our analysis, counter inflation policies should include the achievement of an inflation barrier consistent with full employment without inflationary pressures. This can be addressed by ensuring that there is sufficient productive capacity to underpin full employment, where sufficient is to be interp...
European Journal of Economics and Economic Policies: Intervention, 2011
Geoff Harcourt has been a thoroughgoing Keynesian committed to the achievement of sustainable (en... more Geoff Harcourt has been a thoroughgoing Keynesian committed to the achievement of sustainable (environmental and otherwise) and equitable (nationally and internationally) economic development and growth, and full employment of the available labour force. Achieving such an objective would require, inter alia, the maintenance of a high level of aggregate demand consistent with the full employment of labour, and the provision of sufficient productive capacity to enable that full employment, where sufficient is to be interpreted in terms of quantity, quality and geographical distribution. In this paper the ways in which fiscal policy should be used to sustain high levels of aggregate demand, necessary though not sufficient for full employment, are explored. Geoff has been a long-standing advocate of incomes policies to contain inflation without resorting to demand deflation. We argue that with the failures of inflation targeting, itself based on demand deflation, the need to develop inc...
A number of countries have adopted Inflation Targeting (IT) since the early 1990s in an attempt t... more A number of countries have adopted Inflation Targeting (IT) since the early 1990s in an attempt to reduce inflation to low levels. Since then, IT has been praised by most literature as a superior framework of monetary policy. We suggest that IT is a major policy prescription closely associated with the New Consensus Macroeconomics (NCM). This paper concentrates mainly on the IT aspects of the NCM. We address the theoretical foundations of IT. This is followed by an assessment of its theoretical foundations, where a number of aspects are discussed. We then turn our attention to an assessment of the empirical work on IT, where we distinguish the work that has been done utilising structural macroeconomic models, and work based in single equation techniques. The IT theoretical framework and the available empirical evidence do not appear to support the views of the proponents.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
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Papers by Malcolm Sawyer