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2022 | OriginalPaper | Buchkapitel

1. Macro-Economic and Financial Policies for Sustainability and Resilience

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Abstract

The focus of this contribution is on macroeconomic and financial policies. It relies on fiscal, monetary and financial stability policies, which aim to develop sustainable and resilient market economies. This contribution relies on our macroeconomic model, which accounts for the financial sector, and a proper role for governments and thereby fiscal policy. It also accounts for distributional effects. The macroeconomic model upon which we rely to account for the relevant macroeconomic policies, enables our contribution to deal properly with fiscal, monetary and financial stability policies, and also distributional aspects. Another proposal, and most important, is that these policies should be properly coordinated to achieve sustainable and resilient economies. Our contribution begins with a relevant introduction, and proceeds to highlight our theoretical model. The economic policies of our model are then discussed, along with the next section that deals with the coordination of these policies. Our final section summarizes and concludes.

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Fußnoten
1
Secular Stagnation was suggested (December 1938) by Alvin Hansen in his Presidential Address to the American Economic Association, entitled “Economic Progress and Declining Population Growth”.
 
2
An important aspect of the Volcker Rule is a reminder of the Glass-Steagall Act of 1933 in terms of the separation of investment and commercial banks to avoid their undertaking of excessive risks.
 
3
Vercelli (2017, pp. 155–177) discusses ‘The Genesis of Shadow Banking’ as well as its development since the early 1970s, and suggests that its emergence was “cause and consequence of deep structural changes in the financial system” (p. 155). Especially so, according to Vercelli (op. cit.), in view of “a continuous flow of flexibility-enhancing financial innovations and deep regulation change that aimed to liberalise banks and financial markets from any form of pressing regulations, control, and supervision” (p. 155). Arestis (2016) suggests that the shadow banking system and its operations were one of the main causes of the GFC in relation to their securitization, which became very crucial in the 1970s, especially so with their Collateralized Debt Obligations (CDOs) innovation. Arestis (2016) suggests that an example of successful banking regulation was the 1933 Glass-Steagall Act, which proposed separation of the activities of commercial banks from the risk-taking ‘investment or merchant’ banks, along with strict regulation of the financial services industry. It was successful until its abolition in 1999.
 
4
An interesting, and important, recent development is China’s suspension for three months of one of its top credit rating agencies in view of massive bribes to a former executive of the Golden Credit Rating (Financial Times, 16 December 2020).
 
5
Green bonds are debt instruments, with their proceeds used to finance projects that support environmental- and climate-related projects. As reported in Ehlers et al. (2020), “the market for green bonds has been growing fast” (p. 31).
 
6
China’s unexpected recent commitment to make the country carbon neutral by 2060 is an important way forward (Financial Times, 28 September 2020). Also Cambridge University’s £3.5 bn ‘to divest from fossil fuels’ by 2030 (Financial Times, 2 October 2020).
 
7
Van der Ghote (2018), utilising a dynamic calibrated macroeconomic model that contains a financial intermediary sector with a leverage constraint, with common objective maximising social welfare, reaches the conclusion that coordination of monetary and macroprudential policies reduces substantially the risk of a financial crisis.
 
8
There is a difference in the context of between wage-led vs profit-led economies, and the significance for policy as in the text. See the contributions of Onaran and Galanis (2013) and Lavoie and Stockhammer (2013).
 
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Metadaten
Titel
Macro-Economic and Financial Policies for Sustainability and Resilience
verfasst von
Philip Arestis
Copyright-Jahr
2022
DOI
https://doi.org/10.1007/978-3-030-84288-8_1

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