nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2008‒07‒30
five papers chosen by
Karl Petrick
University of the West Indies

  1. Democracy and social democracy facing contemporary capitalisms: A "régulationist" approach By Robert Boyer
  2. Credit risk models: why they failed in the credit crisis By Wilson Sy
  3. The Variable Time: crucial to understanding Knowledge Economics By Khumalo, Bhekuzulu
  4. Financial system: shock absorber or amplifier? By Franklin Allen; Elena Carletti
  5. The ‘Pre-Eminence of Theory’ versus the ‘General-to-Specific’ Cointegrated VAR Perspectives in Macro-Econometric Modeling By Spanos, Aris

  1. By: Robert Boyer
    Abstract: This article surveys some old and recent political economy research about the long term transformations and contemporary diversity in the mutual relationships between State, civil society and the economy. The hypothesis of institutional complementarity is extended from the institutional forms that sustain "regulation" modes to the analysis of the spill over from the polity to the economy and conversely from the economy to the polity. In spite of common challenges originating from individualization, globalization and financiarization, contrasted national trajectories for socio-economic and political regimes still coexist in contemporary world. The assessment of the relative merits of liberal capitalism, social-liberalism and renewed social-democracy suggests that the later regime is the best suited to limit the process of de-democratization to follow the concept coined by Charles Tilly in his 2007 book on "Democracy". Would social-democracy be the best rampart against the contemporary disenchantment about democracy? This unconventional hypothesis has to be mitigated by the fact that social-democracy "but also liberal democracy" cannot be imported as such. Its basic principles have to follow a process of hydridization according to various national traditions, let them be statist in France or meso-coporatist in Japan since the new demands from diverse civil societies have to be taken into account.
    Date: 2008
  2. By: Wilson Sy (Australian Prudential Regulation Authority)
    Abstract: Abstract: Credit risk models are shown to play a key part in the global credit crisis. We discuss how the credit market has exposed the shortcomings of the credit risk models and we identify their main shortcomings. To overcome the shortcomings, a new causal framework is proposed to build deductive credit default models which have predictive capabilities.
    Date: 2008–07–10
  3. By: Khumalo, Bhekuzulu
    Abstract: Though time is a concept mostly associated with physics and philosophy, the concept of time is important to be understood in the discipline of economics. This paper attempts to highlight the importance of time in economics, particularly in knowledge economics, the discipline of economics that looks into the primary commodity, knowledge. The paper attempts to take into account the non linear time concepts that have been very important since Einstein published his papers back in 1905. Without understanding time in a comprehensive manner, it is not possible to have a firm grip on the process of the economic progression of all societies. A theory must hold true in all societies, the characteristics of time must be the same in all societies, as an atom must behave the same in similar laboratory conditions in all societies. This paper will illustrate that without understanding the variable time, it is not possible to fully comprehend knowledge economics.
    Keywords: knowledge economics; knowl; time dilation; relativity; time reversal; progression; marginal gain in knowledge; average gain in knowledge;
    JEL: O10 A20 B00 C60 O30 A12 C02 D80 B41
    Date: 2008–07–19
  4. By: Franklin Allen; Elena Carletti
    Abstract: This paper identifies two types of market failures. The first concerns a coordination problem associated with panics. The problem in analysing this type of market failure from a policy perspective is that there is no widely accepted method for selecting equilibria. The second market failure concerns the incompleteness of financial markets. The essential problem here is that the incentives to provide liquidity lead to an inefficient allocation of resources. The paper outlines three manifestations of market failure associated with liquidity provision: financial fragility, contagion and asset price bubbles. The framework developed allows some insight into the question of when the financial system acts a shock absorber and when it acts as an amplifier. Having identified when there is a market failure, the paper looks at whether there are policies that can correct the undesirable effects of such failures.
    Keywords: bank regulation, financial crisis, financial intermediation, market failure
    Date: 2008–07
  5. By: Spanos, Aris
    Abstract: The primary aim of the paper is to place current methodological discussions on empirical modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement and Empirical Work” relating to the two different perspectives in Europe and the US that are currently dominating empirical macro-econometric modeling and delves deeper into their methodological/philosophical foundations. It is argued that the key to establishing a constructive dialogue between them is provided by a better understanding of the role of data in modern statistical inference, and how that relates to the centuries old issue of the realisticness of economic theories.
    Keywords: Econometric methodology, ‘general-to-specific’, pre-eminence of theory, VAR, statistical adequacy, realisticness of theory, statistical model
    JEL: B4 C1 C3
    Date: 2008

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