New Consensus Macroeconomics: A Critical Appraisal

Levy Economics Institute, Working Paper No. 564

26 Pages Posted: 27 May 2009

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; University of the Basque Country

Date Written: May 22, 2009

Abstract

This paper is concerned with the New Consensus Macroeconomics (NCM) in the case of an open economy. It outlines and explains briefly the main elements of and way of thinking about the macroeconomy from the standpoint of both its theoretical and its policy dimensions. There are a few problems with this particular theoretical framework. We focus here on two important aspects closely related to NCM: the absence of banks and monetary aggregates from this theoretical framework, and the way the notion of the “equilibrium real rate of interest” is utilized by the same framework. The analysis is critical of NCM from a Keynesian perspective.

Keywords: New Consensus Macroeconomics, Monetary Policy, Banks, Monetary Aggregates, Equilibrium Real Rate of Interest

JEL Classification: E10, E12

Suggested Citation

Arestis, Philip, New Consensus Macroeconomics: A Critical Appraisal (May 22, 2009). Levy Economics Institute, Working Paper No. 564, Available at SSRN: https://ssrn.com/abstract=1410657 or http://dx.doi.org/10.2139/ssrn.1410657

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

University of the Basque Country

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

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