A view on post-keynesian interest rate policy

Abstract

The dominant role of the »new consensus models« in central banks’ policy-making in the last two decades has triggered the reaction of post-Keynesian economists to examine alternatives to inflation-targeting monetary strategies and to Taylor-type interest rate rules. This paper develops a simple macroeconomic model in order to pinpoint the distributional/demand effects of rentiers’ interest income in a money/debt-using and demand determined economy. The ultimate objective of this model is to provide a starting point for the development of a post-Keynesian approach to interest rate policy that differs from the »activist« and the »parking-it« approaches.