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Keynes on the Sequencing of Economic Policy: Recovery and Reform in 1933

Sebastian Edwards

NBER Working Paper No. 24367
Issued in March 2018
NBER Program(s):Program on the Development of the American Economy, International Finance and Macroeconomics Program, The Monetary Economics Program

On December 31 1933, The New York Times published an open letter from John Maynard Keynes to President Franklin D. Roosevelt. In it Keynes encouraged FDR to expand public works through government borrowing. He also criticized FDR’s exchange rate policy, and argued that there was a need for lower long-term interest rates. But perhaps the most interesting feature of this letter is that Keynes made comments on the sequencing and speed of economic policies. He argued that “recovery” policies should precede “reform” measures. In this paper I analyze this particular aspect of the open letter, and I argue that for Keynes exchange rate stability was a key component of what he considered to be the appropriate order of policy. I also provide a comparison between Keynes’s views on sequencing and those developed in the 1980s and 1990s.

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Document Object Identifier (DOI): 10.3386/w24367

Published: Sebastian Edwards, 2017. "Keynes on the Sequencing of Economic Policy: Recovery and Reform in 1933," History of Economics Review, vol 68(1), pages 17-34.

 
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