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on Post Keynesian Economics |
| By: | Greg Hannsgen; Tai Young-Taft |
| Abstract: | We hope to model financial fragility and money in a way that captures much of what is crucial in Hyman Minsky's financial fragility hypothesis. This approach to modeling Minsky may be unique in the formal Minskyan literature. Namely, we adopt a model in which a psychological variable we call financial prudence (P) declines over time following a financial crash, driving a cyclical buildup of leverage in household balance sheets. High leverage or a low safe-asset ratio in turn induces high financial fragility (FF). In turn, the pathways of FF and capacity utilization (u) determine the probabilistic risk of a crash in any time interval. When they occur, these crashes entail discrete downward jumps in stock prices and financial sector assets and liabilities. To the endogenous government liabilities in Hannsgen (2014), we add common stock and bank loans and deposits. In two alternative versions of the wage-price module in the model (wage-Phillips curve and chartalist, respectively), the rate of wage inflation depends on either unemployment or the wage-setting policies of the government sector. At any given time t, goods prices also depend on endogenous markup and labor productivity variables. Goods inflation affects aggregate demand through its impact on the value of assets and debts. Bank rates depend on an endogenous markup of their own. Furthermore, in light of the limited carbon budget of humankind over a 50-year horizon, goods production in this model consumes fossil fuels and generates greenhouse gases. The government produces at a rate given by a reaction function that pulls government activity toward levels prescribed by a fiscal policy rule. Subcategories of government spending affect the pace of technical progress and prudence in lending practices. The intended ultimate purpose of the model is to examine the effects of fiscal policy reaction functions, including one with dual unemployment rate and public production targets, testing their effects on numerically computed solution pathways. Analytical results in the penultimate section show that (1) the model has no equilibrium (steady state) for reasons related to Minsky's argument that modern capitalist economies possess a property that he called "the instability of stability," and (2) solution pathways exist and are unique, given vectors of initial conditions and parameter values and realizations of the Poisson model of financial crises. |
| Keywords: | Chartalism; Consumer Debt; Debt Deflation; Demand-led Growth; Financial Fragility Hypothesis; Fiscal Policy; Margin Loans; MMT; Money; Nonequilibrium Economics; Nonlinear Dynamics; Neo-Kaleckian Growth Models; SFC Models; Stagnation; Wage Contour |
| JEL: | E12 E31 E32 E37 O42 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_839&r=pke |
| By: | Freema, Alan |
| Abstract: | This paper was presented in the session on ‘Long Waves in Political Economy’ organised by Ingo Schmidt at the Congress of the Humanities and Social Sciences, Ottawa, June 1-4 2015. It discusses the ‘theoretical turn’ towards state intervention in the last Great Depression and the need for clarity about the underlying views of Keynes and Schumpeter – two of the major opposed players in that theoretical turn. It argues that primary function of economics as an esoteric discipline disguises the essence of these underlying theoretical positions. Thus in order to make a rational and evidence-based connection between theory and policy, attention both to interpretation and to assertive pluralism is indispensable. |
| Keywords: | pluralism, political economy, economics |
| JEL: | B0 B4 |
| Date: | 2015–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64809&r=pke |
| By: | Giovanni Andrea Cornia |
| Abstract: | The paper reviews the extent of the income inequality decline that took place in Latin America in 2002-10 and then focuses on the factors that may explain such decline. These include a lowered skill premium following an expansion of secondary education among the poor, and the adoption of more equalizing tax, labour market subsidies and macro policies by a growing number of progressive governments. Finally, the paper reviews the changes in inequality during 2009-12 and discusses whether and how the recent decline can be sustained over the next decade in the context of sluggish world growth. |
| Keywords: | Education, Equality and inequality, Fiscal policy, History, Local, Income distribution |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2015-020&r=pke |
| By: | Ahmed, Jubayer |
| Abstract: | The main objective of this study is to analyze the impact of individual’s self-concept in consumption pattern. Consumers intentionally or unintentionally consume different products and services during their lifetime and their consumption pattern or preferences are closely associated with their sense of self. Similarly, consumers tend to avoid commodities or services that contradict with their self-image. A number of empirical studies have been analyzed further to investigate the influence of self- concept on brand or product selection. |
| Keywords: | Consumer, Brand, Product, Self-concept and image |
| JEL: | M31 M37 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64806&r=pke |
| By: | Schlicht, Ekkehart |
| Abstract: | This note proposes a growth model that is derived from the standard Solow growth model by replacing the neoclassical production function with Kaldor’s technical progress function while maintaining a marginalist theory of factor prices in the spirit suggested by von Weizsäcker (1966, 1966b). The hybrid model so obtained accounts for balanced growth in a way that appears less arbitrary than the Solow model, especially because it directly accounts for Harrod neutral technical change, without any need for further assumptions. |
| Keywords: | directed technical change; directed technological change; bias in innovation; technical progress function; neoclassical production function; Harrod neutrality; Hicks neutrality; Cambridge theory of distribution; marginal productivity theory; Kaldor; Kennedy; von Weizsäcker; Solow model |
| JEL: | O30 O40 E12 E13 E25 B59 B31 |
| Date: | 2015–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:24853&r=pke |
| By: | Byrnes, Liam; Brown, Colin |
| Abstract: | As Australia grapples with increasing renewable energy penetration and the appropriate climate change strategy, renewable energy policy plays an increasingly important role. In recent years the renewable energy policy environment has become increasingly politicised and uncertain. The implications for the industry are significant. In light of this policy environment, this paper sets out the economic theory behind public sector market intervention and contextualises it within the Australian renewable energy context. It highlights the barriers facing renewable energy deployment and explores the current status of Australian renewable energy policy. This analysis reveals market failures and other barriers to deployment as well as entrenched enabling policy, regulatory and institutional frameworks for fossil fuel industries. This context was found to justify government intervention to support the renewables sector and improve overall economic efficiency. Building on this analysis, five observations relevant to the development of future renewable energy policy are outlined. |
| Keywords: | Energy Policy; Energy; Renewable Energy Policy; Renewable; Policy Development; Australia |
| JEL: | E61 E65 H0 H3 O2 O3 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64977&r=pke |
| By: | Ramesh Paudel (Crawford School of Public Policy, The Australian National University) |
| Abstract: | This paper surveys the available literature on liberalisation and growth, updates the widely used Sachs and Warner (1995) index of trade liberalisation for 193 countries up to 2010, and then investigates the impacts of trade liberalisation in economic growth using a dynamic growth model for a large set of panel data covering the period of 1985-2010. The results show that the impact of trade liberalisation on economic growth differs across countries depending on the stage of economic development. Lower-middle income countries, on average, benefit at least 3% more compared to other developing countries from the trade liberalisation. This finding makes a strong case for taking into account the stage of economic development in making policy recommendations for trade policy reforms, departing from the standard ÒWashington ConsensusÓ approach. |
| Keywords: | liberalisation; economic reform; economic development; economic growth |
| JEL: | F14 P26 N10 O40 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:een:crwfrp:1413&r=pke |
| By: | Dascher, Kristof |
| Abstract: | Urban policy visibly molds city shape. This paper's interest is in how city shape (less visibly) molds urban policy. The paper finds: A sufficiently skewed city will look after its center. That is, the more skewed a city's shape towards the city periphery, the more likely an urban majority against any policy that could take away from the city center. This, when broadly interpreted, complements Sullivan's (1896) "form follows function" view prominent in architectural theory. Function (building uses) also follows form (building contours). Ultimately combining both views may help explain further how, and when, cities sprawl. |
| Keywords: | City Shape; City Skew; Form Follows Function; Political Economy; Sprawl |
| Date: | 2015–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:bay:rdwiwi:31910&r=pke |
| By: | Antonio Estache |
| Abstract: | This short paper takes stock of our collective knowledge on the importance of corruption in the infrastructure. It covers the measurement, the effects on the sector performance and the interactions with other sectors. It concludes with a few recommendations for the international community. |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/174923&r=pke |
| By: | Barton, J.; Davies, L; Foxon, T.J.; Galloway, S.; Hammond, Geoff; O'Grady, Áine; Robertson, E.; Thomson, M. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:bme:wpaper:44217&r=pke |
| By: | Nicola Fuchs-Schuendeln; Tarek Alexander Hassan |
| Abstract: | A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the use of natural experiments across these different applications and summarize what they have taught us about such diverse subjects as the validity of the Permanent Income Hypothesis, the size of the fiscal multiplier, and about the effects of institutions, social structure, and culture on economic growth. We also outline challenges for future work in each of these fields, give guidance for identifying useful natural experiments, and discuss the strengths and weaknesses of the approach. |
| JEL: | C1 C9 E21 E62 H31 O11 O14 O43 O50 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21228&r=pke |