Interest Rates and Macroeconomic Policy

  • John S. Flemming

Abstract

This chapter addresses four themes. The first is the way in which inappropriate monetary policy may cause unemployment. This possibility is not peculiarly Keynesian, indeed Friedman’s prescription of steady money supply growth is based on the view that this is the relevant ‘appropriate policy’ to avoid recession and unemployment. The second theme relates to the relative methodological merits of specifying monetary policy in terms of the quantity of money, as Friedman does (and Keynes is usually thought to have), or in terms of the interest rate itself. Thirdly I look at the same issue in more practical terms of policy design, and finally at the role of the interest rates in achieving an intermediate target for the exchange rate as a way of pursuing a smooth path for nominal GDP.

Keywords

Depression Income 

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Copyright information

© National Economic Development Office 1988

Authors and Affiliations

  • John S. Flemming

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