Monetary policy and regulation of financial markets - a Keynesian view

Abstract

The purpose of the paper is to explore the relationship between theory and policy in a Keynesian framework. Post Keynesian theory is developed with a view to addressing policy questions, rather than a separable abstraction, within a general exercise in political economy as a moral science. The starting point is the nature of the economy and its different manifestations in different contexts; the resulting methodology is discussed in terms of pluralism. There is a resulting interdependence between theory, institutional design and policy, the discussion drawing on the work of Niebyl. The significance of this Keynesian approach to policy is illustrated by a discussion of monetary policy and bank regulation in the modern context.