Money, Financial Instability and Stabilization Policy

Money, Financial Instability and Stabilization Policy

Edited by L. Randall Wray

Money, Financial Instability and Stabilization Policy consists of original articles by leading Post Keynesians, Kaleckians and other heterodox economists from the developed and developing world. Post Keynesian literature has long been associated with the study of money, financial markets and financial instability. Indeed, this is perhaps the area to which Post Keynesians have made the greatest contributions. The authors to this volume present an overview of the latest research on monetary theory and policy, financial markets, and financial instability coming out of the Post Keynesian school of thought. They provide an indication of the wide-ranging interests and of the truly international scope of Post Keynesian research. The first half of the volume is theoretical, while the second half includes papers that are either empirical or more focused on specific concerns.

Chapter 9: The Washington Consensus and (Non-) Development

Hansjörg Herr and Jan Priewe

Subjects: development studies, development economics, economics and finance, development economics, post-keynesian economics


9. The Washington Consensus and (non-)development Hansjörg Herr and Jan Priewe Introduction In this chapter we deal with some principal issues of strategies for development. First, we focus on the role of macroeconomic policies in what has been coined as the ‘Washington Consensus’. The term was invented by John Williamson (1990) to express what he thought would be the lowest common denominator of policy advice to Latin American countries by Washington-based institutions. Here, we detect some shortcomings and lack of clarity which reflect that there perhaps never really has existed a more or less clear Washington Consensus, especially concerning macroeconomic strategies. We conclude that macroeconomic policies have to play a much more important and comprehensive role especially in the area of monetary and exchange rate policy, and the balance of payment equilibrium. After interpreting the Washington Consensus in the first section, we discuss some of its macroeconomic key shortcomings in section two. Section three gives a short overview of a positive and a negative development scenario, the latter leading to repressed growth in a broadly liberalized market economy. In the final section an alternative policy package is sketched briefly. The chapter attempts to give a comprehensive and summarizing critique and cannot go into details of the argumentation. Interpreting the Washington Consensus Whether it was or still is a consensus or not, there is probably a broad assent among many in the IMF and the World Bank that developing and transition countries need a mix of macroeconomic stabilization and...

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