There is a legitimate argument here about the extent of the effectiveness of monetary policy and its (negative/positive) effects on real output. Rochon distinguishes between two traditions within Post Keynesian economics:
(1) the activist Post Keynesians (Basil Moore , Giuseppe Fontana, Thomas Palley), who, instead of an inflation target, wish to use activist monetary policy to target output, investment or capacity utilization;These approaches are derived from the Keynes and Kaldor endogenous money tradition; they reject neoclassical, new consensus inflation targeting.
(2) the group Rochon calls the “parking it” Post Keynesians, who contend the fiscal policy is the main tool to target output, employment and investment, while monetary policy comes with disturbing side effects on real variables. The relationship between interest rates and output is complex and not linear: the monetary transmission between interest rates and real economic variables is unreliable and complicated. The interest rate should be parked at a given level and fiscal policy should be employed. They are three further subdivisions within the “parking it” Post Keynesians:(i) the Smithin rule: the real rate of interest should be very low, close to zero (John Smithin);
(ii) the Kansas city rule: the nominal rate of interest should be zero, possibly negative real rates of interest (Wray, Matthew Forstater, Pavlina Tcherneva).
(iii) the Pasinetti rule/Fair Rate rule: the real rate of interest should be equal to the rate of growth of labour productivity (Pasinetti).
Moore, B. J. 1988. Horizontalists and Verticalists: The Macroeconomics of Credit Money, Cambridge University Press, Cambridge and New York.
Rochon, Louis-Philippe and Matias Vernengo (eds.). 2001. Credit, Interest Rates, and the Open Economy: Essays on Horizontalism, Edward Elgar Pub., Northampton, MA.
Rochon, Louis-Philippe and Sergio Rossi (eds.). 2003. Modern Theories of Money: The Nature and Role of Money in Capitalist Economies, Edward Elgar Pub, Cheltenham.