Economic Growth and Macroeconomic Stabilization Policies in Post-Keynesian Economics
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Economic Growth and Macroeconomic Stabilization Policies in Post-Keynesian Economics

Edited by Hassan Bougrine and Louis-Philippe Rochon

Hassan Bougrine, Louis-Philippe Rochon and the expert contributors to this book explore issues of economic growth and full employment; presenting a clear explanation to stagnation, recessions and crises, including the latest Global Financial Crisis of 2007-8. With a central focus on the role played by government spending, deficits and debt as well as the setting of interest rates, the chapters propose alternative policies that can be used by central banks and fiscal authorities to deal with problems of income inequality, unemployment and slow productivity.
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Chapter 17: The Great Deception: the ‘science’ of monetary policy and the Great Moderation revisited

Gilberto Tadeu Lima, Mark Setterfield and Jaylson Jair da Silveira

Abstract

Conventional wisdom suggests that the Great Moderation was caused by either good policy, good luck (favourable shocks), more efficient private-sector behaviour (such as better inventory management), or more effective financial innovations. This chapter shows that it may, instead, have originated from the complementarity of an erroneous reading of the economy by central bankers and evolutionarily time-varying heterogeneity in inflation-expectations formation within the private sector. One general finding of the authors’ analysis is that seemingly inadequate stabilization policies may, in fact, work. They comment on the broader ramifications for stabilization policy of this finding.

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