Long period interest rate rules in a demand-led Kaldor-Pasinetti-Sraffa- Keynes growth model
- Publication Type:
- Journal Article
- Journal of Post Keynesian Economics, 2012, 34 (3), pp. 521 - 546
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This paper uses a detailed macroeconomic model characterized by demand-led growth, Sraffian pricing, and the Kaldor-Pasinetti analysis of income distribution at the macrolevel to develop a framework for evaluation of the long-term implications of monetary policy. Focus is placed on the development of interest rate rules that ensure balanced long-run growth with either stable observable unemployment or zero or low underlying unemployment, and comparison is made between these rules and other Post Keynesian policy rules. Strong support is provided for the effectiveness of the Smithin rule, which fixes the real rate of interest although an alternative rationale for this rule is provided. © 2012 M.E. Sharpe, Inc.
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