This paper outlines the fundamental arguments of the New Consensus, critiques it from a Post-Keynesian perspective, and offers a Post-Keynesian alternative to the Taylor Rule. While Post-Keynesian economics provides a theory of endogenous money with exogenous interest rates, it has no clear description of a central bank reaction function. We attempt to remedy this oversight by identifying some of the difficulties attached to developing a Post-Keynesian reaction function, and suggesting an approach to the setting of interest rates that is more consistent than the Taylor Rule with Keynes's General Theory.
In his contribution, Louis-Philippe Rochon provides a clear and concise overview of the main aspects of the theory of the monetary circuit, focusing on the problem of the determination of aggregate profits. On this specific point, we believe his conclusions, as other contributions to this literature, are misguided by not properly taking into consideration the accounting constraints for the simplified economy being described, where accounting must imply that every money flows come from somewhere and goes somewhere, so that there are no "black holes" 1 .
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