This chapter reviews the main arguments put forward against the horizontalist view of endogenous credit and money and an exogenous rate of interest under the control of monetary policies. It argues that the structuralist arguments put forward in favour of an endogenously increasing interest rate when investment and economic activity are rising, owing to increasing indebtedness of the firm sector or decreasing liquidity in the commercial-bank sector, raise major doubts from a macroeconomic perspective. This is shown by means of examining the effect of increasing capital accumulation on the debt–capital ratio of the firm sector in a simple Kaleckian distribution and growth model.
Empirically, the macroeconomic institutions and the macroeconomic policy approach in the Eurozone have failed badly, both in terms of preventing the global financial and economic crisis from becoming a euro crisis and in generating a rapid recovery from the crisis, in particular. In this contribution will argue that the dominating macroeconomic policy regime in the Eurozone can be seen as a version of what Steindl called ‘stagnation policy’. We examine the macroeconomic institutions and the macroeconomic policy approach of the Eurozone which has been based on the New Consensus Macroeconomics, and we highlight its main deficiencies leading to stagnation policy. This will then provide the grounds for an outline of an alternative macroeconomic policy approach for the specific institutional setup of the Eurozone based on a post-Keynesian approach.