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Philip Arestis

Arestis presents the convergence Maastricht criteria and discusses briefly the theoretical framework that underpins the euro model while placing emphasis on the issues of the EMU fiscal and monetary policies. The author highlights some of the policy faults that lie at the heart of the euro, and raises the question of ‘whether the euro can be saved’. A positive answer requires political integration in the absence of economic integration in the European Union.

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Philip Arestis

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Philip Arestis

This contribution focuses on a coherent new way of thinking about the macroeconomy in terms of both economic theory and economic policies. The central bank should focus on financial stability; for fiscal policy in the short term and in the long term to address demand issues is very important. Interest rate policy should be such that the real rate of interest is in line with trend rate of growth in the economy. Fiscal and monetary policies, though, should be coordinated closely. Major central bank cooperation and intervention in the foreign exchange market is necessary to control the exchange rate. Regional and industrial policies to create the required capacity are important, along with incomes policies, to contain inflationary/deflationary pressures. Distribution of income and wealth is another important policy dimension in view of its importance in terms of the great recession.

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Philip Arestis

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Philip Arestis

The purpose of this paper is to compare new developments on the monetary policy front, or what is known as inflation targeting, with some of Keynes's ideas as propounded in a pamphlet in 1932. A number of the ingredients of the new monetary policy approach can be found in Keynes, especially that of central bank independence. However, new monetary policy is a major policy prescription closely associated with the New Consensus Macroeconomics. The ideas and policy implications of this new consensus, however, are very different from Keynes's ideas on central banking and monetary policy. We explore these propositions in this contribution.

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Philip Arestis

First paragraph

This special issue of Intervention. European Journal of Economics and Economic Policies is devoted to Geoff Harcourt, self-proclaimed Australian patriot and Cambridge economist. His work is squarely within the Political Economy approach to economics. In 2010 Geoff Harcourt decided to return back to his Australian roots and it is for this reason that the organisers of the 7th international conference, Developments in Economic Theory and Policy, Bilbao (Spain), 1–2 July 2010, Department of Applied Economics V, University of the Basque Country, and Cambridge Centre for Economic and Public Policy, University of Cambridge, set up two sessions to celebrate Geoff Harcourt's work. The editors of Intervention very kindly offered to publish the proceedings of the two sessions in this issue. Not only did Geoff Harcourt attend the conference, he also contributed to the sessions. This special issue begins with his contribution.

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Philip Arestis

This paper examines recent theoretical and empirical developments on fiscal policy to conclude that it is an effective macroeconomic tool in terms of curing unemployment. It is further shown that financial stability, ignored prior to the ‘Great Recession’, is important in economic policy. Fiscal policy can contribute to curing unemployment, especially so when coordinated closely not only with monetary policy but also with financial stability policies. It is also suggested that such coordination should be geared towards reducing income inequality. It is then high time that economists and economic policy-makers turned their attention more closely and seriously to restoring faith in fiscal policy with its strong macroeconomic role as a means of curing unemployment. Fiscal policy, properly coordinated with monetary and financial stability policies, should thereby be restored to its proper upgraded role in terms of economic policy.

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Philip Arestis

Current macroeconomics, the ‘New Consensus Macroeconomics’, downgrades significantly the role of fiscal policy as a stabilisation instrument of macroeconomic policy. This paper argues that fiscal policy deserves to be properly upgraded. More recent theoretical and empirical developments on the fiscal policy front are closely examined. This examination reveals that these developments lead to the conclusion that fiscal policy is not as ineffective as argued by the ‘New Consensus Macroeconomics’ proponents. On the contrary, it has a strong macroeconomic role. It is also the case that, in view of the ‘Great Recession’, financial stability has been shown to be very important in economic policy but had been ignored prior to it. The paper argues strongly that fiscal policy is actually a strong macroeconomic stabilisation instrument, especially so when it is coordinated not only with monetary policy but also and closely with financial stability policies – with such coordination-embracing income distribution. Fiscal policy should thereby be restored to its proper upgraded role in terms of economic policy. It is, therefore, high time economists and economic policymakers turned their attention more closely and seriously to this aspect and restored fiscal policy to its strong macroeconomic role.