nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2012‒11‒24
three papers chosen by
Karl Petrick
University of the West Indies

  1. From the Financial Instability Hypothesis to the theory of Capital Market Inflation: a structural interpretation of the sub-prime crisis By Eugenio Caverzasi
  2. "The Impact of Financial Reform on Federal Reserve Autonomy" By Bernard Shull
  3. Keynes’s probability: An introduction to the theory of logical groups By Strati, Francesco

  1. By: Eugenio Caverzasi (Department of Economics and Management, University of Pavia)
    Abstract: The aim of this paper is to develop a structural explanation of the subprime mortgage crisis, grounded on the combination of two apparently incompatible financial theories: the Financial Instability Hypothesis by Hyman P. Minsky and the theory of Capital Market Inflation by Jan Toporowski. The theoretical analysis - presented in the first part of the paper - will then be reproduced in a Stock Flow Consistent model, to test its coherence, both logical and with respect to stylized facts in the U.S. economy.
    Date: 2012–11
  2. By: Bernard Shull
    Abstract: The Federal Reserve has been criticized for not preventing the risky behavior of large financial companies prior to the financial crisis of 2008-09, for approving mergers that aggravated the "too big to fail" problem, and for its substantial contribution to bailouts when their risk management failed. The Dodd-Frank Act of 2010, in attempting to diminish financial instability and eliminate too-big-to-fail policies, has established a new regulatory framework and laid out new responsibilities for the Federal Reserve. In doing so, it appears to address criticisms of the central bank by constricting its autonomy. The law, however, has also extended the Federal Reserve's supervisory authority and expanded its capacity to exercise regulatory control over its extended domain. This new authority is in addition to the augmentation of its monetary powers over the past several years. This paper reviews and evaluates both constraints imposed on the Federal Reserve by the Dodd-Frank Act and the expansion of Federal Reserve authority. It finds that the constraints are unlikely to have much impact, but the expansion of authority constitutes a significant increase in power and influence. The paper concludes that the expansion of Federal Reserve authority invites questions about the organizational design and governance of the central bank, and its traditional autonomy.
    Keywords: Financial Crisis; Federal Reserve; Government Policy and Regulation
    JEL: G01 G28
    Date: 2012–11
  3. By: Strati, Francesco
    Abstract: The present work is intended to be an informal introduction to the theory of abstract logi- cal groups. This particular formalization stems from some concepts of abstract algebra and the Johnson-Keynes’s theory of groups. Therefore the aim of this paper is that of provide the readers with the logical reasoning behind this brand new theory. I shall depict the philosophical notions as bases of the Keynes’s probability and then I shall explain it in terms of group. Furthermore we shall see, albeit roughly, a first definition of abstract groups.
    Keywords: Abstract algebraic logic; Keynes’s probability
    JEL: E12 B16 D80
    Date: 2012–08–14

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