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Contemporary Post Keynesian Analysis

Edited by L. Randall Wray and Mathew Forstater

Original articles by leading scholars of post Keynesian economics make up this authoritative collection. Current topics of the greatest interest are covered, such as: perspectives on current economic policy; post Keynesian approaches to monetary theory and policy; economic development, growth and inflation; Kaleckian perspectives on distribution; economic methodology; and history of heterodox economic theory. The contributors explore a variety of prevailing issues including: wage bargaining and monetary policy in the EMU; the meaning of money in the internet age; stability conditions for small open economies; and economic policies of sustainable development in countries transitioning to a market economy. Other enduring matters are examined through the lens of economic theorists – Kaleckian dynamics and evolutionary life cycles; a comparison between Keynes’s and Hayek’s economic theories; and an analysis of the power of the firm based on the work of Joan Robinson, to name a few.
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Chapter 7: Stability Conditions for a Small Open Economy

Etelberto Ortiz


Etelberto Ortiz THE ISSUES Is there any good reason to believe that the standard policy recipes conceived out of common views and problems of the 1980s, should work in an entirely different environment nowadays? This question is addressed to the current orthodox view in response to whichever disequilibrium appears: sound macroeconomic conditions rest on a null fiscal deficit and negligible inflation. Nevertheless in the 1998 address to the World Bank Conference on Trade and Development, Joseph Stiglitz expressed his doubts about the form in which the 1995 Mexican and the 1997 South-East Asian crises exploded. In both cases we were in the presence of ‘successful models’, at least according to the view of the World Bank and the IMF. Both engaged in long successful efforts to reduce the public deficit to zero and the rate of inflation to a single digit. Both were the ‘stars’ of structural change policies on the basis of trade and financial liberalization. Nevertheless, both collapsed into severe payments and financial crisis. Undoubtedly there are many common features with the recent collapse of the Argentinean economy. This chapter takes the view that current economic policies look as if they were drawn only from inflationary experiences of the 1970s and 1980s, when monetization of chronic public deficits were the original sources of inflationary pressures. But today’s crises may not necessarily be the result of excess drawing of the government on the Central Bank. In fact the core of our argument...

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