|
on Post Keynesian Economics |
| By: | C.A.E. Goodhart; P. Sunirand; D.P. Tsomocos |
| Abstract: | The purpose of this paper is to assess the choice between adopting a monetary base or an interest rate setting instrument to maintain financial stability. Our results suggest that the interest rate instrument is preferable, since during times of a panic or financial crisis the Central Bank automatically satisfies the increased demand for money. Thus, it prevents sharp losses in asset values and enhanced asset volatility. |
| Keywords: | interest rates, monetary base, bank capital, financial stability, monetary policy |
| JEL: | D58 E44 G28 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:sbs:wpsefe:2008fe26&r=pke |
| By: | John Weeks (Professor Emeritus, School of Oriental and African Studies, University of London) |
| Abstract: | This paper inspects the standard policy rule that under a flexible exchange rate regime with perfectly elastic capital flows monetary policy is effective and fiscal policy is not. The logical validity of the statement requires that the domestic price level effect of devaluation be ignored. The price level effect is noted in some textbooks, but not analysed. When it is subjected to a rigorous analysis, the interaction between exchange rate changes and domestic price level changes render the standard statement false. The logically correct statement would be, under a flexible exchange rate regime with perfectly elastic capital flows the effectiveness of monetary policy depends on the values of the import share and the sum of the trade elasticities. Monetary policy will be more effective than fiscal policy if and only if the sum of the trade elasticities exceeds the import share. Inspection of data from developing countries indicates a low effectiveness of monetary policy under flexible exchange rates. In the more general case of less than perfectly elastic capital flows, the conditions for monetary policy to be more effective than fiscal policy are even more restrictive. Use of empirical evidence on trade shares and interest rate differentials suggest that for most countries fiscal policy would prove more effective than monetary policy under a flexible exchange rate regime. In any case, the general theoretical assertion that monetary policy is more effective is incorrect. The results sustain the standard Keynesian conclusion that fiscal policy is more effective, whether the exchange rate is fixed or flexible. (...) |
| Keywords: | The Effectiveness of Monetary Policy Reconsidered |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:pubipc:1616109&r=pke |
| By: | James Forder |
| Abstract: | In his Nobel lecture, Friedman built on his earlier argument for a 'natural rate of unemployment' by painting a picture of an economics profession which, as a result of foolish mistakes, had accepted the Phillips curve as offering a lasting trade-off between inflation and unemployment and were thereby led to advocate a policy of inflation. It is argued here that in fact the orthodox economists of the time did not accept Phillips' analysis; almost no one made the mistakes in question; and very few advocated inflation on bases vulnerable to Friedman's theoretical critique. The Phillips curve was put to various uses, but advocating inflation was hardly amongst them. It is suggested that one lasting result of the uncritical acceptance of Friedman's history is to limit what appears to be within the reasonable range of views about macroeconomic policy. |
| Keywords: | Phillips Curve, Inflation, Friedman |
| JEL: | B22 B31 E12 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:398&r=pke |
| By: | James Forder |
| Abstract: | The 'expectations critique', usually attributed to Friedman or Phelps and dated towards the end of the 1960s, in fact originates much earlier. And rather than being an insight properly attributable to a particular individual, it was, by that time, a commonplace of economic discussion. This much is easy to establish. It is argued that the common attribution arises at least in part because the Keynesians unwisely chose to express their disagreement with Friedman in terms of expectations rather than in terms of the existence of the natural rate of unemployment. As a result, forty years later, it has become hard to see that two separate points ever existed. |
| Keywords: | Phillips Curve, Inflation, Expectations Critique |
| JEL: | B22 B31 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:399&r=pke |
| By: | Maurizio Mistri (University of Padua) |
| Abstract: | This paper analyzes the contributions to political economy of Carlo Cattaneo as an ante litteram institutionalist scholar. Carlo Cattaneo has been an original thinker with a polyhedricity of cultural interests. From a point of view of political economy, we can say that Cattaneo was influenced by the concept of sociality. He studied the human action framed in his social and relational dimensions. Cattaneo was aware that the development of society needed to be seen as the result of complex interactive and often conflicting forces. Carlo Cattaneo has been interested in forces that generate change in social and economic structures. One of these forces is the human intelligence -to day we say knowledge- which is at basis of his value theory. Another important force is the action of the enterpreneurs, who are the engines of economic progress. Cattaneo devoted a particulr attention to links between law and economic activities. In the paper the role of laws on economic trajectories is discussed, with a special attention to the effects of Israeli interdictions. |
| Keywords: | technological change, institutions, knowledge |
| JEL: | D83 K2 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0079&r=pke |
| By: | Robson, Doug (Department of Finance and Deregulation); Rodgers, Joan R (University of Wollongong) |
| Abstract: | During the last decade or so Australia has experienced high rates of economic growth and low levels of unemployment, conditions that are expected to impact favourably on working people at the lower end of the income distribution. But similar conditions in other countries have been accompanied by unexpectedly high rates of poverty among working people and their dependents. This paper investigates the extent and nature of working poverty in Australia. Its aim is to determine whether or not working poverty is the “new face of poverty in post-industrial Australia”. |
| Keywords: | Working Poverty, working poor |
| JEL: | I32 I30 J21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:uow:depec1:wp08-08&r=pke |
| By: | Marwan Elkhoury |
| Abstract: | Credit rating agencies (CRAs) play a key role in financial markets by helping to reduce the informative asymmetry between lenders and investors, on one side, and issuers on the other side, about the creditworthiness of companies or countries. CRAs´ role has expanded with financial globalization and has received an additional boost from Basel II which incorporates the ratings of CRAs into the rules for setting weights for credit risk. Ratings tend to be sticky, lagging markets, and overreact when they do change. This overreaction may have aggravated financial crises in the recent past, contributing to financial instability and cross-country contagion. The recent bankruptcies of Enron, WorldCom, and Parmalat have prompted legislative scrutiny of the agencies. Criticism has been especially directed towards the high degree of concentration of the industry. Promotion of competition may require policy action at national and international level to encourage the establishment of new agencies and to channel business generated by new regulatory requirements in their direction. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:unc:dispap:186&r=pke |
| By: | Axel Dreher (ETH Zurich, KOF Swiss Economic Institute, Switzerland and CESifo, Germany); Martin Gassebner (ETH Zurich, KOF Swiss Economic Institute, Switzerland) |
| Abstract: | We examine whether and under which circumstances World Bank projects and IMF programs affect the likelihood of major government crises. Using a sample of more than 90 developing countries over the period 1970-2002, we find that crises are on average more likely as a consequence of Bank and Fund involvement. While the effects of the IMF to some extent depend on the model specification, those of the World Bank are shown to be robust to the choice of control variables and method of estimation. We also find that governments face an increasing risk to enter a crisis when they remain under an arrangement once the economy performs better. The (economic) conditions present when a new arrangement is initiated, however, do not affect the impact of Fund and Bank on the probability of a crisis. Finally, while crisis probability rises when a government turns to the IFIs itself, programs inherited by preceding governments do not affect the probability of a crisis. |
| Keywords: | Political Crisis, International Financial Institutions |
| JEL: | D72 F34 P48 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:08-200&r=pke |