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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 10: Allied, German and Latin Perspectives on Inflation

Alcino Câmara and Matias Vernengo


10. Allied, German and Latin perspectives on inflation Alcino Câmara and Matias Vernengo1 INTRODUCTION Post Keynesian authors have emphasized in the last decades that the balance of payments constitutes the main constraint to growth (Davidson, 1990). In this respect, post Keynesians have refuted neoclassical views that assume a supply constrained economy, and have extended Keynes’s principle of effective demand into the long run (growth theory). Hence, growth is seen as being demand led. While these ideas are certainly important, post Keynesians have neglected, for the most part, the importance of the balance of payments constraint in explanations of the inflationary phenomena. High inflation and hyperinflation are not very common phenomena. In the twentieth century episodes of high inflation and hyperinflation occurred after the two World Wars, after the Latin American debt crises and after the collapse of the socialist block. In all these historical events balance of payments crises, severe depreciation and fiscal crises were present. Neoclassical economics always emphasized the fiscal component and neglected everything else. On the other hand, post Keynesians generally looked at normal times, inflation in developed countries, and emphasized the role of distributive conflict. However, German authors during the 1923 hyperinflation, and Latin American authors during the 1980s, have emphasized the importance of balance of payments crises. This chapter brings those ideas to the fore by discussing the contributions of the German Balance of Payments School and the Latin American neostructuralists. Three important points are...

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