nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2009‒11‒27
five papers chosen by
Karl Petrick
University of the West Indies

  1. The macroeconomics of "financialisation" and the deeper origins of the world economic crisis By Till van Treeck
  2. Rethinking Monetary and Financial Policy: Practical suggestions for monitoring financial stability while generating employment and poverty reduction By Gerald Epstein
  3. Public Policy Options to Build Wealth for America’s Middle Class By Christian E. Weller; Amy Helburn
  4. "Can Euroland Survive?" By Stephanie A. Kelton; L. Randall Wray
  5. Growth After the Crisis By Rodrik, Dani

  1. By: Till van Treeck (IMK at the Hans Boeckler Foundation)
    Abstract: In recent years, the interdisciplinary literature on financialisation has become one of the most quickly developing areas in the social sciences, including (Post Keynesian) macroeconomics. We discuss the relevance of the financialisation hypothesis in a non-technical manner from a macroeconomic perspective. Our interpretation of financialisation allows one to analyse the fundamental changes that the US and other economies have undergone over the past three decades or so. In particular, it helps to understand how the US economy has turned from a "debt-led" system, combining relatively weak physical investment activity, strong consumer spending, high income inequality and increasing indebtedness of firms and private households, to a "debt-burdened" system. In light of the current world economic crisis, the Keynesian financialisation hypothesis now seems to be increasingly shared among policy makers and economists.
    Date: 2009
  2. By: Gerald Epstein
    Abstract: <p> As the world financial crisis deepens, the task of generating decent employment has taken on more urgency, yet now faces even more obstacles then before. Of course, a key component of the solution to the current crisis will be massive expansionary fiscal actions on the part of the rich countries, preferably in a coordinated fashion, but individually if necessary. More aid and support from the rich countries and international institutions to the developing world will also be necessary to avoid a very serious, negative shock for the world's poorest and most vulnerable. In the short and medium run, as before the recent crisis, the key will be to generate large scale increases in decent work if developing countries and the world are to avoid a downward spiral into depression. But what macroeconomic policy frameworks should be used to design policies to address this crises both in the short and in the medium terms?   </p><p>What is clear is that to design and carry out these employment-oriented macroeconomic policies, the old neo-libereal orthodoxy must be abandoned, and policy makers must look for other policy frameworks to inform their macroeconomic and financial policies.   </p><p>In this paper, Epstein summarize employment oriented macroeconomic and financial policies that governments in developing countries can adopt to help promote more and better employment as a key to reducing poverty over the medium to long run. </p>
    Date: 2009
  3. By: Christian E. Weller; Amy Helburn
    Abstract: <p> The financial crisis of 2007 and thereafter has taken a toll on family wealth. About $15 trillion (in 2008 dollars) --22.8%--were lost in the first 18 months of the financial crisis which started in the spring of 2007. The loss of household wealth deserves public policy attention. Wealth serves critical economic security functions in an economy that relies heavily on individual initiative, such as the United States. It is a store of future income, in the case of retirement, unemployment, illness or injury which allows families to smooth consumption over their lifetime. Families with sufficient wealth also need not worry about the basic necessities of life and may focus on longer term economic opportunity. </p><p>Christian Weller and Amy Helburn describe three goals for public policy to help families build stable and sustainable wealth: greater savings rates, lower costs of building wealth, and less risk exposure. In Working Paper, they highlight a few policy examples in each of these categories. </p>
    Date: 2009
  4. By: Stephanie A. Kelton; L. Randall Wray
    Abstract: Social unrest across Europe is growing as Euroland's economy collapses faster than the United States', the result of falling exports and a weaker fiscal response. The controversial title of this brief is based on a belief that the nature of the euro itself limits Euroland's fiscal policy space. The nations that have adopted the euro face "market-imposed" fiscal constraints on borrowing because they are not sovereign countries. Research Associate Stephanie A. Kelton and Senior Scholar L. Randall Wray foresee a real danger that these nations will be unable to prevent an accelerating slide toward depression that will threaten the existence of the European Union.
    Date: 2009–11
  5. By: Rodrik, Dani
    Abstract: How hospitable will the global environment be for economic growth in the developing world as we come out of the present financial crisis? The answer depends on how well we manage the following tension. On the one hand, global macro stability requires that we prevent external imbalances from getting too large. On the other hand, growth in poor nations requires that the world economy be able to absorb a rapid increase in the supply of tradables produced in the developing world. It is possible to render these two requirements compatible, but doing so requires greater use of explicit industrial policies in developing countries, which have the potential of encouraging modern tradable activities without spilling over into trade surpluses. The “price” to be paid for greater discipline on real exchange rates and external imbalances is greater use (and permissiveness towards) industrial polices.
    Keywords: Economic growth; Financial crisis
    JEL: F43 O11
    Date: 2009–09

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