nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2007‒03‒31
five papers chosen by
Karl Petrick
University of the West Indies

  1. The macroeconomic governance of the European Monetary Union: A Keynesian perspective By Angel Asensio
  2. Monetary and budgetary-fiscal policy interactions in a Keynesian context: revisiting macroeconomic governance By Angel Asensio
  3. New-Consensus Macroeconomic Governance in a Keynesian world, and the Keynesian alternative By Angel Asensio
  4. Sraffa's Mathematical Economics - A Constructive Interpretation By K. Vela Velupillai
  5. Shifts in Economic Geography and their Causes By Anthony J. Venables

  1. By: Angel Asensio (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII])
    Abstract: Extending Asensio's closed-economy framework (2005a,b) to a monetary union, we show that the<br />principles of governance which emanate from the so called "New Consensus in Macroeconomics"<br />(NCM), and therefore have been designed for presumed stationary regimes, may cause severe<br />dysfunctions, such as depressive macroeconomic policies and unemployment traps, in non-ergodic<br />regimes. The Keynesian approach, on the other hand, pleads in favour of important changes in the<br />current governance of the eurozone. First, since the European Central Bank can not repress distributive<br />inflationary pressures without having non-temporary depressive effects on aggregate demand and<br />employment, authorities should recognize that the best way for controlling this type of inflation rests<br />on a consensual distribution of income. Second, authorities should abandon any "optimal rule"<br />designed in order to stabilize the economy near to an imaginary "natural" trend. Keynesian uncertainty<br />rather suggests a gradual and pragmatic approach to macroeconomic policy. From this perspective, we<br />show that the European Monetary Union could take advantage of the complementarity between the<br />common monetary policy and the national budgetary and fiscal instruments.
    Keywords: Monetary policy, Fiscal policy, Monetary union, Macroeconomic governance,<br />Post-Keynesian
    Date: 2007–03–28
  2. By: Angel Asensio (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII])
    Abstract: Because it was designed for efficient stationary regimes, the New-Consensus Macroeconomic governance carries several drawbacks when implemented in Keynesian non-ergodic regimes. As long as Keynesian unemployment is interpreted in terms of 'natural' rate, it serves as a macroeconomic policy target in such a way that the policy mix may anchor the system far from full employment. We develop an argument that suggests a Keynesian explanation (which involves inappropriate economic policy) of what New Keynesians have referred to as unemployment hysteresis. However, difficulties do not vanish when authorities adopt the Keynesian vision of the world, for policy makers also have to deal with uncertainty. In contrast with the automatic economic-policy rules of the New Consensus Macroeconomics (NCM), we put forward a Keynesian pragmatic and progressive approach, based on intermediate targets designed with respect to the confidence that authorities have in the chances of success (which depends on the context and moves with it). Monetary and budgetary-fiscal policy interactions are discussed in such a context. Even if the monetary policy ability to reduce interest rates and increase effective demand is doubtful, it matters indirectly through avoiding increases in interest rates when fiscal and budgetary policy aims to stimulate effective demand.
    Keywords: Monetary policy, fiscal policy, macroeconomic governance, post-Keynesian
    Date: 2007–03–28
  3. By: Angel Asensio (CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII])
    Abstract: The paper presents both the New Consensus and Keynesian equilibrium within the usual four<br />competitive macro-markets structure. It gives theoretical explanations of the pernicious<br />effects that the NCM governance, which has been designed for ergodic stationary regimes,<br />brings about in Keynesian non-ergodic regimes. It put forward Keynesian principles of<br />governance which include monetary, budgetary and fiscal instruments, and suggest new<br />directions for the positive and normative analysis of macro-policies.
    Keywords: Fiscal policy, Macroeconomic governance, Monetary policy, Post-Keynesian
    Date: 2007–03–29
  4. By: K. Vela Velupillai
    Abstract: The claim in this paper is that Sraffa employed a rigorous logic of mathematical reasoning in his book, Production of Commodities by Means of Commodities (PCC), in such a way that the existence proofs were constructive. This is the kind of mathematics that was prevalent at the beginning of the 19th century, which was dominated by the concrete, the constructive and the algorithmic. It is, therefore, completely consistent with the economics of the 19th century, which was the fulcrum around which the economics of PCC was conceived.
    Keywords: Existence Proofs, Constructive Mathematics, Algorithmic Mathematics, Mathematical Economics, Standard System.
    JEL: B23 B24 B31 B41 B51
    Date: 2007
  5. By: Anthony J. Venables
    Abstract: This paper analyses some of the forces that are changing the spatial distribution of activity inthe world economy. It draws on the 'new economic geography' literature to argue theimportance of increasing returns to scale and cumulative causation processes in shaping theproductivity and comparative advantage of different regions. In the presence of suchincreasing returns there may be persistent spatial disparities in productivity. Economicdevelopment will tend to be 'lumpy', with some regions (countries, or smaller areas such ascities) experiencing rapid growth and others being left behind.
    Keywords: economic geography, urbanisation, world economy, productivity
    JEL: F1 R1
    Date: 2006–12

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