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Keynesian macroeconomic policy: Theoretical analysis and empirical evidence

Arestis Philip (University of Cambridge, UK + University of Basque Country, Spain)
Filho Fernando Ferrari (Federal University of Rio Grande do Sul + National Council for Scientific and Technological Development, Brazil)
Bittes Terra Fábio Henrique (Federal University of ABC, National Council for Scientific and Technological Development, Brazil)

Investment depends on subjective factors, such as expectations, conventions, and confident animal spirits. In a context of economic instability and crises, economic policy is the main source to support entrepreneurs’ expectations and investment. In this sense, macroeconomic policies are capable of affecting effective demand and building a good institutional environment, which is essential to keep the entrepreneurs’ expectations confident and promote their animal spirits. Given these propositions, this contribution has two objectives. The first is to develop a Keynesian type of macroeconomic policy able to stimulate investment and effective demand, and, as a result, mitigate unemployment. The idea is to offer alternative macroeconomic policy prescriptions in relation to the New Consensus Macroeconomics one. This proposal aims to establish the role, according to the Post Keynesian view, the logic of operation of each policy, and the proper coordination among these Keynesian macroeconomic policies. The second objective is to present, briefly, relevant empirical evidence of the Post Keynesian macroeconomic policies.

Keywords: Keynes, Economic policy, Fiscal policy, Monetary policy, Exchange rate policy