Comparing Post-Keynesian and New-Keynesian Paradigms in Monetary Policy

Salimi, Sara and Kazinczy, Eszter and Tatay, Tibor (2025) Comparing Post-Keynesian and New-Keynesian Paradigms in Monetary Policy. REGIONAL AND BUSINESS STUDIES, 17 (1). pp. 5-23. ISSN 2061-2311

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Abstract

The changing global economy often requires a review of monetary policy frameworks, stressing the importance of clear theories and practical use. This paper aims to understand how different Keynesian-based theories tackle modern economic issues, especially in managing inflation, unemployment, and financial stability. Although both Post-Keynesian and New-Keynesian theories stem from Keynesian economics, they offer different methods and policy suggestions based on their unique theoretical bases. This paper addresses a gap in current research by providing a systematic comparative analysis of how Post-Keynesian and New-Keynesian frameworks influence real-world monetary policymaking, especially during financial crises and periods of structural economic change, areas often discussed separately but not directly compared. It outlines the theoretical assumptions, policy tools, and economic impacts of each school, offering a clearer understanding of their practical relevance. This comparison is vital for policymakers and economists facing complex economic conditions who require robust and flexible theoretical guidance. This study reveals that while both approaches contribute valuable insights to economic policymaking, they diverge significantly in their own perspectives on economic stabilization and crisis response. Post-Keynesians emphasize monetary endogeneity and the remediation of structural fragilities, whereas New-Keynesians prioritize market imperfections and expectation management via policy instruments.

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