Monetary policy, financial crisis and state: A Keynesian approach

Abstract

This paper discusses the Keynes’ monetary theory of production and the role being played by the State in modern capitalist economy and business, especially in times of general crisis, like the subprime crisis in the United States experienced in recent period. The paper describes the Keynes monetary economics approach and presents the favorable view of the British economist about the State action in the capitalist economy, given its inability to self-regulation. Based on the recent financial crisis impacts, it is proposed a discussion about the position taken by the State tomitigate the crisis effects. The paper examines if the tools that the government has been using in the economic policies designed in the international financial crisis have a Keynesian reason. The main results show evidences of expansionary economic policies based on liquidity, tax cuts and rising costs. This paper concludes that in instability conditions it is necessary to consider a moreactive role by the State in addressing the crisis and in the lack of confidence economic agents.

Key words: Keynes, State, international crisis.