Inflation targeting and Keynes's political economy

This paper argues that inflation targeting, in the manner proposed by the "new consensus" in macroeconomics, is not a socially, desirable monetary policy strategy and is not compatible with Keynes's political economy. Inflation targeting is likely to cause distributional changes that benefit rentiers, which, in turn, might operate as it source of deficient demand, unemployment, and low growth rates of gross domestic product. The econometric analysis that appears in this paper uses parcel data for a sample of 13 Organization for Economic Cooperation and Development countries and assesses the relevance of some of Keynes's monetary hypotheses. The findings provide support that rentiers' income influences negatively both the aggregate demand growth and the unemployment rate.