Macroeconomics and natural rates: some reflections on Pasinetti’s fair rate of interest


Monetary policy based on the Wicksellian natural rate of interest is progressively losing its hold on macroeconomic theory and policy. We advocate a ‘park it’ approach to monetary policy, where the interest rate is not set as a counter-cyclical tool based on this natural rate. The paper presents what has been called the Pasinetti rule, based on his concept of the fair or just rate of interest – a distribution-neutral rate. Central banks should insure that the nominal rate of interest – the long-term government bond rate – is equal to the growth rate of labour compensation.

Volume :- No.13 (2019)

Issue No :- 2 (2019)

Pages :- 139-165

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