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The Macroeconomics and Financial System Requirements for a Sustainable Future

Author

Listed:
  • Giuseppe Fontana

    (The University of Leeds)

  • Malcolm Sawyer

    (The University of Leeds)

Abstract

The paper develops a macro-economic analysis along broadly defined Post Keynesian and Kaleckian lines, which incorporates ecological constraints on the pace of economic growth. Since growth is viewed as demand-driven, this involves bringing demand into line with the sustainable ‘ecological footprint’. A simple model of demand- driven growth is constructed from which some basic conclusions are drawn of the consequences of slower growth and lower investment including those for the rate of interest and the rate of profit. The macroeconomic policy to deliver full employment is indicated. The growth of the effective labour force and the sustainable rate of growth of the ‘ecological footprint’ are introduced and the relationships between them and the demand-driven rate of growth explored. The macroeconomic analysis has to be embedded with analysis of the monetary and financial system. For this purpose a circuitist analysis is presented. The paper considers the ways in which the monetary and financial systems should be re-structured to be consistent with sustainable growth and low unemployment. The major aims of this re-structuring would be to underpin financial stability, and more importantly to focus the financial sector on the allocation of funds into environmentally friendly investment.

Suggested Citation

  • Giuseppe Fontana & Malcolm Sawyer, 2014. "The Macroeconomics and Financial System Requirements for a Sustainable Future," Working papers wpaper53, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    • Handle: RePEc:fes:wpaper:wpaper53
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    References listed on IDEAS

    as
    1. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115, January.
    2. Harcourt, G. C. & Kriesler, Peter (ed.), 2013. "The Oxford Handbook of Post-Keynesian Economics, Volume 2: Critiques and Methodology," OUP Catalogue, Oxford University Press, number 9780195390759.
    3. Giuseppe Fontana & Alfonso Palacio‐Vera, 2007. "Are Long‐Run Price Stability And Short‐Run Output Stabilization All That Monetary Policy Can Aim For?," Metroeconomica, Wiley Blackwell, vol. 58(2), pages 269-298, May.
    4. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Eckhard Hein & Valeria Jimenez, 2022. "The macroeconomic implications of zero growth: a post-Keynesian approach," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 19(1), pages 41-60, April.
    2. Naqvi, Syed Ali Asjad, 2015. "Modeling Growth, Distribution, and the Environment in a Stock-Flow Consistent Framework," Ecological Economic Papers 2, WU Vienna University of Economics and Business.

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    More about this item

    Keywords

    ecological macroeconomics; sustainability; financial systems; ecological footprint;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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