nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2010‒11‒20
six papers chosen by
Karl Petrick
University of the West Indies

  1. Genesis and foundations of the multiplier: Marx, Kalecki and Keynes By Serena Sordi; Alessandro Vercelli
  2. Financialization and the Global Economy By Engelbert Stockhammer
  3. "Bernanke’s Paradox: Can He Reconcile His Position on the Federal Budget with His Recent Charge to Prevent Deflation?" By Pavlina R. Tcherneva
  4. "Financial Stability, Regulatory Buffers, and Economic Growth: Some Postrecession Regulatory Implications" By Éric Tymoigne
  5. Southern Engines of Global Growth: Very Long Cycles or Short Spurts? By Meghnad Desai
  6. "International Trade Theory and Policy: A Review of the Literature" By Sunanda Sen

  1. By: Serena Sordi; Alessandro Vercelli
    Abstract: This paper explores the Marxian genetic root of the multiplier in order to clarify its foundations and validity conditions. Though the analysis is restricted to the first two volumes of Capital and the early contributions by Kalecki in the 1930s, we argue that we can draw from these works valuable insights into the theoretical and empirical scope of the Kahn-Keynes multiplier.
    Keywords: multiplier, reproduction schema, capitalist process of circulation
    JEL: B23 B41 E11 E12
    Date: 2010–10
  2. By: Engelbert Stockhammer
    Abstract: In this chapter from the forthcoming book, <i>The Political Economy of Financial Crises,</i> edited by Gerald Epstein and Martin H. Wolfson, (Oxford University Press, 2012) Engelbert Stockhammer discusses ‘financialization’, i.e. changes in the role of the financial sector. This will highlight (1) changes in household behavior, in particular with regards to household debt, (2) changes in the behaviour of non-financial businesses, such as shareholder value orientation and increased financial activity and (3) changes in the financial sector, in particular the emergence of the (hardly regulated) shadow banking sector, a shift towards household credit (rather than business credit) and a shift to investment banking/fee generating business.<p></p> <p>Second, the chapter discusses the international dimension of financialization. Here the liberalization of capital flows and its consequences, the determination of exchange rates by capital flows (rather than by current account disequilibria), will be discussed. International financial liberalization has not fulfilled the neoliberal promise of generating investment-based growth, but rather has given rise to a series of financial crises that were typically driven by a swing of capital inflows (‘capital flow bonanza’) followed by capital flow reversals. </p> Third, the chapter offers an interpretation of the finance-dominated accumulation regime as having given rise to two distinct growth models (based on Stockhammer 2010): a credit-financed consumption-driven growth model (mostly in Anglo-Saxon countries) and a export-driven growth model (in Germany, Japan, and, possibly, China). Both growth models suffer from a structural demand deficiency, which is due to wage suppression, but each try to overcome this by different means (credit-financed consumption or export orientation). The chapter thus highlights how financialization with its domestic and international effects have interacted with a polarization of income distribution to generate the structural imbalances that led to the crisis 2007-09.
    JEL: B50 E40 E44 F59
    Date: 2010
  3. By: Pavlina R. Tcherneva
    Abstract: This paper examines Federal Reserve Chairman Ben Bernanke’s recipe for deflation fighting and the specific policy actions he took in the aftermath of the 2008 financial crisis. Both in his academic and in his policy work, Bernanke has made the case that monetary policy is able to stem deflationary forces largely because of its "fiscal components," and that governments like those in the United States or Japan face no constraints in financing these fiscal components. On the other hand, he has recently expressed strong concerns about the size of the federal budget deficit, calling for its reversal in the name of financial sustainability. The paper argues that these positions are fundamentally at odds with each other, and resolves the paradox by arguing on theoretical and technical grounds that there are no fundamental differences in financing conventional government spending programs and what Bernanke considers to be the fiscal components of monetary policy.
    Keywords: Bernanke; Deflation; Monetary Policy; Crowding Out; Financial Sustainability
    JEL: E31 E42 E58 E63 E65
    Date: 2010–11
  4. By: Éric Tymoigne
    Abstract: Over the past 40 years, regulatory reforms have been undertaken on the assumption that markets are efficient and self-corrective, crises are random events that are unpreventable, the purpose of an economic system is to grow, and economic growth necessarily improves well-being. This narrow framework of discussion has important implications for what is expected from financial regulation, and for its implementation. Indeed, the goal becomes developing a regulatory structure that minimizes the impact on economic growth while also providing high-enough buffers against shocks. In addition, given the overarching importance of economic growth, economic variables like profits, net worth, and low default rates have been core indicators of the financial health of banking institutions. This paper argues that the framework within which financial reforms have been discussed is not appropriate to promoting financial stability. Improving capital and liquidity buffers will not advance economic stability, and measures of profitability and delinquency are of limited use to detect problems early. The paper lays out an alternative regulatory framework and proposes a fundamental shift in the way financial regulation is performed, similar to what occurred after the Great Depression. It is argued that crises are not random, and that their magnitude can be greatly limited by specific pro-active policies. These policies would focus on understanding what Ponzi finance is, making a difference between collateral-based and income-based Ponzi finance, detecting Ponzi finance, managing financial innovations, decreasing competitions in the banking industry, ending too-big-to-fail, and deemphasizing economic growth as the overarching goal of an economic system. This fundamental change in regulatory and supervisory practices would lead to very different ways in which to check the health of our financial institutions while promoting a more sustainable economic system from both a financial and a socio-ecological point of view.
    Keywords: Financial Crisis; Financial Regulation; Banking Supervision; Sustainability
    JEL: E12 E58 G18 G28 Q01
    Date: 2010–11
  5. By: Meghnad Desai
    Abstract: This article views the four economies of the South in a long run historical perspective of 1500-2000. It contrasts the history and the initial endowments of the two Northern hemisphere economies China and India which are land scarce and labour abundant with the two Southern hemisphere economies Brazil and South Africa which are land abundant and labour scarce. It argues for different strategies for future growth and discusses impediments which may come in the paths of these four economies in the near future. [Discussion Paper No. 2008/02]
    Keywords: China, India, Brazil, South Africa, development, history
    Date: 2010
  6. By: Sunanda Sen
    Abstract: This paper provides a survey of the literature on trade theory, from the classical example of comparative advantage to the New Trade theories currently used by many advanced countries to direct industrial policy and trade. An account is provided of the neo-classical brand of reciprocal demand and resource endowment theories, along with their usual empirical verifications and logical critiques. A useful supplement is provided in terms of Staffan Linder’s theory of "overlapping demand," which provides an explanation of trade structure in terms of aggregate demand. Attention is drawn to new developments in trade theory, with strategic trade providing inputs to industrial policy. Issues relating to trade, growth, and development are dealt with separately, supplemented by an account of the neo-Marxist versions of trade and underdevelopment.
    Keywords: Comparative Costs; Resource Endowment Pattern and Trade; Overlapping Demand; Strategic Trade; New Theories of Trade; Trade and Development
    JEL: F11 F12 F14
    Date: 2010–11

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