nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2007‒06‒18
seven papers chosen by
Karl Petrick
University of the West Indies

  1. "Fiscal Policy in a Stock-Flow Consistent (SFC) Model" By Wynne Godley; Marc Lavoie
  2. "Employment Guarantee Programs: A Survey of Theories and Policy Experiences" By Fadhel Kaboub
  3. "ELR-led Economic Development: A Plan for Tunisia" By Fadhel Kaboub
  4. "Economic Perspectives on Aging" By Dimitri B. Papadimitriou
  5. James Meade By David Vines
  6. A counter-cyclical framework for a development-friendly international financial architecture By José Antonio Ocampo; Stephany Griffith-Jones
  7. The Foundations of the Economics of Innovation By Antonelli Cristiano

  1. By: Wynne Godley; Marc Lavoie
    Abstract: This paper deploys a simple stock-flow consistent (SFC) model in order to examine various contentions regarding fiscal and monetary policy. It follows from the model that if the fiscal stance is not set in the appropriate fashion—that is, at a well-defined level and growth rate—then full employment and low inflation will not be achieved in a sustainable way. We also show that fiscal policy on its own could achieve both full employment and a target rate of inflation. Finally, we arrive at two unconventional conclusions: first, that an economy (described within an SFC framework) with a real rate of interest net of taxes that exceeds the real growth rate will not generate explosive interest flows, even when the government is not targeting primary surpluses; and, second, that it cannot be assumed that a debtor country requires a trade surplus if interest payments on debt are not to explode.
    Date: 2007–04
  2. By: Fadhel Kaboub
    Abstract: This working paper provides a survey of the theoretical underpinnings for the various employment guarantee schemes, and discusses full employment policy experiences in the United States, Sweden, India, Argentina, and France. The theoretical and policy developments are delineated in a historical context. The paper concludes by identifying some questions that still need to be addressed in the context of the global political economy.
    Date: 2007–05
  3. By: Fadhel Kaboub
    Abstract: This paper establishes the financial feasibility of an employer of last resort (ELR) program in a small developing country like Tunisia, and argues that an ELR-led economic development policy is vastly superior to the traditional import substitution industrialization (ISI), export-led, and FDI-led development models, all of which Tunisia has adopted without much success in reducing unemployment. Despite outperforming its peers in terms of macroeconomic stability, Tunisia's official unemployment rate still hovers around 15 percent, with two-thirds of first-time job seekers having university degrees. The paper demonstrates that a well-targeted ELR program can be gradually introduced over a six-year period to remedy this problem by reclaiming sovereignty over the country's domestic monetary and fiscal policies under a floating exchange rate regime. The estimated ELR net wage bill would be around 2.7 percent of GDP; however, spending by ELR workers would offset program costs, and the net effect on GDP would be an increase of about 3.6 percent. The paper concludes by proposing a set of complementary policy reforms that must accompany an ELR program to ensure long-term growth sustainability along with full employment and price stability.
    Date: 2007–05
  4. By: Dimitri B. Papadimitriou
    Abstract: The aging of the U.S. population will be a critical public policy issue in the years ahead. This paper surveys the recent literature on the economics of aging, with a special emphasis on government spending on the aged. The U.S. Census Bureau projects that the proportion of the elderly in the total population will increase while the proportion of the working-age population will decline. This demographic shift implies a significant growth in the number of beneficiaries of major federal entitlement programs. Existing rules and escalating health care costs are expected to lead to fiscal pressures and to pose challenges for economic growth. The paper offers the author's assessment of the forces that determine government spending on retirees. It also examines how the retirement and health care of older citizens might be financed, and measures the potential impact of different reform proposals. Finally, it provides an introduction to an edited volume, Government Spending on the Elderly.
    Date: 2007–05
  5. By: David Vines
    Abstract: This article explains the part that Meade played in the creation of Keynes`s General Theory, describes his work with Keynes during the Second World War in the creation of the IMF and the GATT, and summarizes the ideas in The Theory of International Economic Policy for which Meade was awarded the Nobel Prize in 1977. It also sets out the role that Meade played in the construction of the inflation-targeting regime which became the centrepiece of British macroeconomic policymaking in the 1990s.
    Keywords: Balance of Payments, Inflation Targeting, Heckscher-Ohlin Trade Theory, International Monetary Fund, World Trade Organisation
    JEL: E0 F0
    Date: 2007
  6. By: José Antonio Ocampo; Stephany Griffith-Jones
    Abstract: The major task of a development-friendly international financial architecture is to mitigate pro-cyclical effects of financial markets and open “policy space” for counter-cyclical macroeconomic policies in the developing world. This paper explores a series of policy instruments for this purpose: counter-cyclical prudential regulatory and supervisory frameworks; market mechanisms that better distribute the risk faced by developing countries through the business cycle; multilateral instruments that encourage more stable private flows; and better provision of counter-cyclical official liquidity. It also suggests that regional macroeconomic consultation, and common reserve funds or swap arrangements among developing countries can play a role in this regard.
    Keywords: volatility, contagion, financial crises, counter-cyclical macroeconomic policies, counter­cyclical prudential regulation, GDP-indexed and local currency bonds, regional macroeconomic cooperation.
    JEL: F3 F32 F4 F42
    Date: 2007–07
  7. By: Antonelli Cristiano (University of Turin)
    Date: 2007–02

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