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on Post Keynesian Economics |
| By: | Fronti, Javier Garcia; Miller, Marcus; Zhang, Lei |
| Abstract: | The Argentine convertibility regime, where the peso was fixed at parity with the US dollar, ended with a ‘twin crisis’ – a tripling in the price of a dollar and a protracted closure of the entire banking system – accompanied by an economic contraction so severe that it is often referred to as ‘Nuestra gran depresión’. But the government's attempt to imitate President Roosevelt by pesifying dollar loan contracts (while simultaneously protecting dollar depositors) had the effect of destroying bank net worth in the absence of credible compensation. To analyse the macroeconomic effects of credit crunch and currency collapse (and of policies to mitigate them), we turn to a model of crisis, specifically that of Aghion, Bacchetta & Banerjee (2000). Our account, however, combines the supply contraction cause by balance sheet effect with a Keynesian demand contraction due to a domestic credit crunch, exacerbated by unsuccessful resolution of the banking crisis. The latter is analysed as a game of political economy played between government and banks about who pays for the banking crisis induced by default and asymmetric pesification. |
| Keywords: | Argentina debt crisis; asymmetric pesification; conflicting beliefs; keynesian recession; twin crisis |
| JEL: | E12 E51 F34 G18 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4889&r=pke |
| By: | van der Ploeg, Frederick |
| Abstract: | After a brief review of classical, Keynesian, New Classical and New Keynesian theories of macroeconomic policy, we assess whether New Keynesian Economics captures the quintessential features stressed by JM Keynes. Particular attention is paid to Keynesian features omitted in New Keynesian workhorses such as the micro-founded Keynesian multiplier and the New Keynesian Phillips curve. These theories capture wage and price sluggishness and aggregate demand externalities by departing from a competitive framework and give a key role to expectations. The main deficiencies, however, are the inability to predict a pro-cyclical real wage in the face of demand shocks, the absence of inventories, credit constraints and bankruptcies in explaining the business cycle, and no effect of the nominal as well as the real interest rate on aggregate demand. Furthermore, they fail to allow for quantity rationing and to model unemployment as a catastrophic event. The macroeconomics based on the New Keynesian Phillips curve has quite a way to go before the quintessential Keynesian features are captured. |
| Keywords: | bankruptcy; inventories; Keynesian economics; liquidity; monetary policy; monopolistic competition; New Keynesian Phillips curve; nominal wage rigidity; pro-cyclical real wage; unemployment; welfare |
| JEL: | E12 E32 E63 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4897&r=pke |
| By: | Howard Petith |
| Abstract: | A new model of unemployment based on an idea of Marx is presented and used to interpret the development of the British economy from the beginning of capitalism to the present. It is shown that unemployment may be created purposely by capitalists in order to weaken the bargaining position of the workers. This mechanism leads to complex temporal pattern of unemployment and can explain why wages took almost a century and a half to react to the growing capital to labour ratio that characterised early British capitalism. |
| Keywords: | Capitalism, Marx, Great Britain, unemployment |
| JEL: | E11 E24 N33 O41 O51 P1 |
| Date: | 2005–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:649.05&r=pke |
| By: | James Crotty; Kang-Kook Lee |
| Abstract: | As late as October 1997 the IMF declared that the Korean economy was experiencing a temporary liquidity squeeze, not a solvency problem. Yet in December 1997 Deputy Managing Director Stanley Fischer declared that Korea suffered from a systemic “breakdown of economic relations” so complete that only radical economic restructuring could restore prosperity. The IMF attached what it called “extreme structural conditionality” to its loan agreements with Korea, demanding a complete and rapid transition from Korea’s traditional East Asian economic model to a globally integrated neoliberal model. We subject the IMF’s assertion that the allocative efficiency of the Korean economy had collapsed by 1997 to a number of empirical tests, including time series and cross-section analyses of capital productivity and corporate profitability, and firm and industry level econometric tests of the proposition that investment spending was excessive and misallocated in the pre-crisis period. This evidence does not support the IMF’s systemic breakdown claim. We conclude that the IMF’s imposition of “extreme structural conditionality” on Korea is best understood as an illegitimate and antidemocratic exercise of power designed to meet the needs of the IMF’s key constituents rather than those of the majority of Korea’s people. |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp77&r=pke |
| By: | James K. Boyce |
| Abstract: | Globalization – viewed as a process of economic integration that embraces governance as well as markets – could lead to worldwide convergence toward higher or lower environmental quality, or to environmental polarization in which the ‘greening’ of the global North is accompanied by the ‘browning’ of the global South. The outcome will not be dictated by an inexorable logic. Rather it will depend on how the opportunities created by globalization alter balances of power within countries and among them. |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp78&r=pke |
| By: | Michael Meeropol |
| Abstract: | This paper addresses a major omission in the way textbook writers and journalists utilize Adam Smith’s concept of the “invisible hand” to make Adam Smith an intellectual precursor of modern neo-liberal economic policy. Specifically, the paper addresses the use of the concept of the “invisible hand” by Adam Smith to address two major issues in the debate over neo-liberal policy: the international flow of capital and its role in the location of investment projects and the inequality in the distribution of income that might result from certain policies. The neo-liberal mantra about Adam Smith’s invisible hand asserts that so long as there is sufficient competition and no government intervention beyond the protection of life, liberty and property, the pursuit of individual self interest will result in an improvement in the aggregate well being of society as a whole. This is true even if investments are made overseas and if economic inequality increases. Aside from some contributions to the professional literature, virtually everyone else who writes about the invisible hands ignores what Adam Smith actually said. This paper restates what Smith said when he used the term “invisible hand” in both The Wealth of Nations and in The Theory of Moral Sentiments. It places his use of the term in context to illustrate how far Smith departs from the distortions of his neo-liberal self-described admirers. |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp79&r=pke |