nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2011‒01‒23
four papers chosen by
Karl Petrick
University of the West Indies

  1. A Structural Economic Dynamic Approach to the Exchange Rate: New Insights from the Multi-Sector Thirlwall’s Law By Ricardo Azevedo Araujo
  2. Economic Geography By Jacques-François Thisse
  3. Are universal banks better underwriters? Evidence from the last days of the Glass-Steagall Act By Dario Focarelli; David Marques-Ibanez; Alberto Franco Pozzolo
  4. Psychological suggestion to P Krugman By Rosinger, Elemer Elad

  1. By: Ricardo Azevedo Araujo (Departamento de Economia (Department of Economics) Faculdade de Economia, Administração, Contabilidade e Ciência da Informação e Documentação (FACE) (Faculty of Economics, Administration, Accounting and Information Science) Universidade de Brasília)
    Abstract: In this paper it is shown that permanent variations in the level of the exchange rate play an important role in the sectoral composition of the economy and this fact has important implications in terms of a disaggregated version of the Thirlwall’s law even if the argument of the quantitative unimportance of relative price movements holds. The growth rate of a country is then shown to be affected by movements in the level of nominal exchange rates.
    Date: 2011–01
  2. By: Jacques-François Thisse (CORE, Université Catholique de Louvain and CREA, Université de Luxembourg)
    Date: 2011
  3. By: Dario Focarelli (ANIA.); David Marques-Ibanez (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Alberto Franco Pozzolo (Università del Molise.)
    Abstract: It has often been argued during the recent credit crisis that commercial banks’ involvement in investment banking activities might have had an impact on the intensity of their underwriting standards. We turn to evidence from the period prior to the complete revocation of the Glass-Steagall Act in the United States and analyze whether investment banks or – section 20 subsidiaries of – commercial banks underwrote riskier securities. We compare actual defaults of these deals for an extensive sample of about 4,000 corporate debt securities underwritten during the period of the de facto softening of the Act’s restrictions. Securities underwritten by commercial banks’ subsidiaries have a higher probability of default than those underwritten by investment houses. This evidence is stronger in the case of ex-ante riskier and more competitive issues, and during the first years of bank securities’ subsidiaries’ entry into the market. Based on our results, it is not possible to reject that the repeal of the Glass-Steagall led to looser credit screening by broad (universal) banking companies trying to gain market share and/or to the lower initial ability of these banks to correctly evaluate default risk. JEL Classification: G21, G24, N22.
    Keywords: Glass-Steagall Act, securities underwriting, default, investment banking.
    Date: 2011–01
  4. By: Rosinger, Elemer Elad
    Abstract: Recently, P Krugman has suggested that psychology should be included in the theory of economics in view of its critical role played in the behaviour of the large masses of people whose day to day participation impacts so heavily upon economic affairs. Here it is argued that such an inclusion of psychology as an important component of economic theory should further be extended to the psychology of theoretical economists as well. Indeed, the severe division of theoretical economists along various preconceived or a priori lines is still affecting with a massive negative effect our national and global economies. And while democracy may be a legitimate approach in politics, since no one can seriously claim that politics is a science, on the contrary, and precisely to the extent that economics is claimed by some to have by now reached the level of science, such arbitrary sharp divisions, mostly politically motivated, which we still have in the theory of economics may indeed require the urgent and significant consideration of the psychology of the respective theoretical economists.
    Keywords: psychology of theoretical economists; to be included in economics theory
    JEL: B0 A1 B3 A11 A14
    Date: 2011–03

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