The Macroeconomics of Industrial Strategy

Levy Economics Institute Working Paper No. 238

22 Pages Posted: 18 Sep 1998

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

Malcolm C. Sawyer

Levy Economics Institute

Date Written: June 1998

Abstract

This paper explores some of the links between macroeconomic policy and industrial strategy. The perspective of the present paper is to emphasize the role of the output and investment activities of enterprises rather than the general focus on the labor market in the determination of economic performance. We have explored this aspect in some detail in connection with the inflation barrier and argue that such a barrier should be viewed in terms of a lack of capacity. We briefly review the balance of trade constraint on growth and employment. The overall implications of those two sets of analyses is that macroeconomic performance would be enhanced by appropriate industrial strategy and that inappropriate macroeconomic policies will damage industrial performance. Policies designed to restrain inflation by lowering the level of aggregate demand will tend to depress investment and harm capacity. Improved industrial performance requires a climate conducive to investment and research and development, which in turn depends on, inter alia, high and stable levels of aggregate demand.

JEL Classification: E69, L16, L51

Suggested Citation

Arestis, Philip and Sawyer, Malcolm C., The Macroeconomics of Industrial Strategy (June 1998). Levy Economics Institute Working Paper No. 238. Available at SSRN: https://ssrn.com/abstract=115787 or http://dx.doi.org/10.2139/ssrn.115787

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

Malcolm C. Sawyer

Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504-5000
United States
845-758-7700 (Phone)
845-758-1149 (Fax)

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