From the "new consensus in macroeconomics" (NCM) framework, this paper derives a different set of policy proposals. The NCM has become associated with the use of interest rate policy to target inflation and to reach a zero output gap, and to ignore fiscal policy. This paper argues that interest...

This paper explores the macroeconomic consequences of interactions between fiscal and monetary policy, in an environment characterized by endogenous money in which the interest rate is set exogenously by the central bank. Three "benchmark" interest rate operating procedures are identified, none...

This paper engages the last testimony of the Chairman of the Federal Reserve System, Alan Greenspan, before a joint session of Congress in July 2005. It identifies nine areas we relate to the arguments of John Kenneth Galbraith, summarized in his recent contribution, The Economics of Innocent...

In the debate on monetary policy strategies on the two sides of the Atlantic, it is now almost commonplace to contrast the Fed and the European Central Bank (ECB) by pointing out the flexibility and capacity to adjust of the former and the rigidity and extreme caution of the latter, and its...

This comment provides a simple analytical exposition of the model used by Godley and Lavoie (2007a) to argue a case for fiscal stabilization policy. I show that the government-spending stabilization rule they propose ensures budget solvency as long as private-sector saving behavior is stable. If...

In academic and policy circles, the assumption is often made that the Fed and the European Central Bank (ECB) have a perfectly identical understanding of what monetary policy can achieve and they follow the same policy strategy. This assumption seats uncomfortably with the different legislative...

A fully opened capital account, a pure floating exchange rate, and inflation-targeting monetary policy is the macroeconomic setting currently recommended in Latin America by the International Monetary Fund and the orthodoxy. In this paper, we present an alternative macroeconomic regime proposal...

Despite compelling arguments by Lester Telser, the myth continues that the recession of 1937-38 was caused by the Federal Reserve's three increases in reserve requirements from 1936 to 1937. Telser argued that banks were able to significantly increase lending prior to the recession by using...