THE KEYNESIAN SYSTEM: FISCAL AND MONETARY POLICY GUIDELINES

Abstract

In this article we shall try to establish the guidelines of
the Keynesian fiscal and monetary policies. In order to better
understand the Keynesian macroeconomic system it is necessary
to go briefly over the Classical economics in the pre-Keynesian
period and the fiscal and monetary policies based on those
analyses. While principally dwelling on the Keynesian
macroeconomic system and the fiscal and monetary policies
based on this system, we think we have some grounds about the
significance of the subject. Firstly, the Keynesian analyses keep
holding the balance of power in the theoretical field even in the
post-Keynes era, and constitute the foundation of the
macroeconomic textbooks. Secondly, despite the economic
conditions of these days which have gone through many changes,
and the emergence of anti-Keynesian views, the governments and
monetary authorities (Central Banks) both in Europe and in the
States, still implement – cautiously– fiscal and monetary policies
in accordance with the Keynesian principles. In effect during
Reagan era in the States and M. Thatcher in Britain, policies
under the influence of Monetarism had been applied, however,
since inflation was not prevented and there was an increase in
unemployment, these policies were forsaken and moderate
Keynesian policies were implemented low-key. But criticisms
coming from both Monetarists and particularly New Classical
economists forced fundamental methodological and assumptive
changes in Keynesianism since the ‘80s; the school that emerged
in the USA is called the New Keynesian Economics, in England
the Post-Keynesian Economics.