Marc Lavoie: Towards a post-Keynesian consensus in macroeconomics: Reconciling the Cambridge and Wall Street views

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Towards a post-Keynesian consensus in macroeconomics: Reconciling the Cambridge and Wall Street views

25 pp.
4.12 EUR
(October 2009)

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This chapter recalls the tensions that have existed between the Fundamentalist Post Keynesians and the Cambridge post-Keynesians, with the former being concerned mostly with financial relations while the latter were mostly studying real magnitudes. The chapter surveys the various efforts that have been made to integrate the two views since the middle of the 1980s, in particular the efforts made to model Minsky’s financial fragility hypothesis. The last section of the chapter shows how financial assets and liabilities as well as financial commitments are best being formalized by using a stock-flow consistent approach. It is also shown how some of the concerns that have arisen as a result of the recent subprime financial crisis can be modelled, by adding residential capital, household debt, or mortgage-based securities.

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