Skip Navigation


Cambridge Journal of Economics Advance Access originally published online on May 29, 2009
Cambridge Journal of Economics 2009 33(4):741-757; doi:10.1093/cje/bep022
This Article
Right arrow Full Text Freely available
Right arrow FREE Full Text (PDF) Freely available
Right arrow All Versions of this Article:
33/4/741    most recent
bep022v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (1)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Leijonhufvud, A.
Related Collections
Right arrow B22 - Macroeconomics
Right arrow E12 - Keynes; Keynesian; Post-Keynesian
Right arrow E44 - Financial Markets and the Macroeconomy
Right arrow E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Right arrow G20 - General
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

This article appears in the following Cambridge Journal of Economics issue: Special Issue: The Global Financial Crisis [View the issue table of contents]

Out of the corridor: Keynes and the crisis

Axel Leijonhufvud*

* UCLA and the University of Trento

Address for correspondence: Professor Axel Leijonhufvud, 212, Effie Way, Pismo Beach, CA 93449, USA; email: axel{at}ucla.edu.

We should learn from Keynes to focus on the macroproblems of our day. Today's problem is the financial crisis and the resulting great recession. Neither the standard Keynesian policies of decades past nor the monetary policy doctrine of recent years provides useful solutions. Dynamic stochastic general equilibrium theory is part of the crisis wreckage, but turning to old or to New Keynesian theory will be of little use. A balance sheet recession requires that policy address the problems in the private sector's capital as well as its income accounts. We need serious theoretical work on problems of system stability using, for example, agent-based methods. Monetary theory needs to develop analysis of processes in which intertemporal budget constraints are violated. Network theory will be useful in that quest.

Key Words: Keynes • Keynesian policy • Minsky • Interest targeting • Corridor stability • Balance sheet recession • Financial crisis • Financial networks • Leverage dynamics • Deleveraging • Positive (adverse) feedback loops • High inflation

JEL classifications: B22, E12, E44, E61, G20

Manuscript received June 10, 2008; final version received March 24, 2009.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 Cambridge J EconHome page
G. M. Hodgson
The great crash of 2008 and the reform of economics
Camb. J. Econ., November 1, 2009; 33(6): 1205 - 1221.
[Abstract] [Full Text] [PDF]

Home page
 Cambridge J EconHome page
S. Blankenburg and J. G. Palma
Introduction: the global financial crisis
Camb. J. Econ., July 1, 2009; 33(4): 531 - 538.
[Full Text] [PDF]


Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.