|
on Post Keynesian Economics |
| By: | Nathan Perry; Nathaniel Cline |
| Abstract: | Several explanations of the "great inflation moderation" (1982-2006) have been put forth, the most popular being that inflation was tamed due to good monetary policy, good luck (exogenous shocks such as oil prices), or structural changes such as inventory management techniques. Drawing from Post-Keynesian and structuralist theories of inflation, this paper uses a vector autoregression with a Post-Keynesian identification strategy to show that the decline in the inflation rate and inflation volatility was due primarily to (1) wage declines and (2) falling import prices caused by international competition and exchange rate effects. The paper uses a graphical analysis, impulse response functions, and variance decompositions to support the argument that the decline in inflation has in fact been a "wage and import price moderation," brought about by declining union membership and international competition. Exchange rate effects have lowered inflation through cheaper import and oil prices, and have indirectly affected wages through strong dollar policy, which has lowered manufacturing wages due to increased competition. A "Taylor rule" differential variable was also used to test the "good policy" hypothesis. The results show that the Taylor rule differential has a smaller effect on inflation, controlling for other factors. |
| Keywords: | Inflation; Taylor Rule; Post-Keynesian; Structuralist |
| JEL: | E12 E31 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_759&r=pke |
| By: | Tropeano, D. |
| Abstract: | The paper argues that the European financial system in the years following the great financial crisis started in 2007 has become increasingly fragile. Minsky’s notion of fragility, on which it is based, is related to history, policy and institutions. In the current European environment, fragility depends on the rise of shadow banks’ assets, the expansion of derivatives and the changes in financial regulation. All these elements have jointly triggered several feedback loops. In Minsky’s opinion, policies should have the scope of thwarting self-enforcing feedback loops. Yet the policies that have been implemented so far seem to have produced the opposite effects. They have created new feedback loops that nurture fragility again. This outcome, however, is not surprising for policies may change initial conditions and have unintended consequences, as Minsky has taught us since a long time. |
| Keywords: | financial fragility; Minsky; European financial system; feedback loops; regulation; thwarting policies |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dip:dpaper:2013-09&r=pke |
| By: | Rania Antonopoulos |
| Abstract: | Walter Bagehot's putative principles of lending in liquidity crises—to lend freely to solvent banks with good collateral but at penalty rates—have served as a theoretical basis for thinking about the lender of last resort for close to 100 years, while simultaneously providing justification for central bank real-world intervention. If we presume Bagehot's principles to be both sound and adhered to by central bankers, we would expect to find the lending by the Fed during the global financial crisis in line with such policies. Taking Bagehot's principles at face value, this paper aims to examine one of these principles—central bank lending at penalty rates—and to determine whether it did in fact conform to this standard. A comprehensive analysis of these rates has revealed that the Fed did not, in actuality, follow Bagehot's classical doctrine. Consequently, the intervention not only generated moral hazard but also set the stage for another crisis. This working paper is part of the Ford Foundation project "A Research and Policy Dialogue Project on Improving Governance of the Government Safety Net in Financial Crisis" and continues the investigation of the Fed's bailout of the financial system—the most comprehensive study of the raw data to date. |
| Keywords: | Lender of Last Resort; Global Financial Crisis; Monetary Policy; Fed Lending Rates; Bagehot’s Classical Doctrine; Fed Emergency Credit and Liquidity Facilities |
| JEL: | J13 J16 J18 O1 O11 O15 O19 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_758&r=pke |
| By: | Alam, M. Shahid |
| Abstract: | Constant returns to scale (CRS) is one of the corner-stones of the competitive general equilibrium paradigm of neoclassical economics. This note argues that the equilibrium solutions of this paradigm are not compatible with CRS. CRS implies that all producers (whatever their scale of production) can produce goods at the same unit costs: and this makes self-production a feasible alternative to market production. In the event, an infinite number of equilibria become possible with a mix of markets and self-production. If labor is the only factor of production, self-production becomes the only option: and the market economy ceases to exist. |
| Keywords: | Constant returns to scale, competitive paradigm, neoclassical economics, second-best, Lipsey, Lancaster,Samuelson, Arrow, Debreu, Kaldor, Allyn Young, general equilibrium, increasing returns to scale, existence, uniqueness, equilibrium, classical economics, Adam Smith, Ricardo, Pareto-optimality, John Bates Clark, Wicksteed, Mirowski, Austrian |
| JEL: | B0 B00 B1 B3 B4 B41 D5 |
| Date: | 2013–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:45153&r=pke |
| By: | Ballinger, Clint |
| Abstract: | MODERN MONETARY THEORY (MMT) notes correctly that money is a creature of the state, and that important macroeconomic and policy conclusions follow from this understanding, e.g., sovereign states are not revenue constrained and spending is primarily limited by inflation. Taxes give value to state money and maintain its value (i.e., inflation can be controlled through taxes). One (among many) key policy insight is that a job guarantee is possible. A job guarantee not only achieves what many think should for myriad social reasons be a primary goal of macroeconomics but also further creates a buffer stock (the most useful one of any imaginable given the social reasons just mentioned) that achieves an additional primary macroeconomic policy goal – stability. However, there is no state that operates under a pure state system of money. Most of what serves as money in most banking systems in the world is privately created credit money. We can compare the current most common banking system with a pure state system of money: |
| Keywords: | The chicago plan, Full Reserve Banking, Modern Monetary Theory, 100% reserves, Alfred Mitchell-Innes, Austrian economics, Bagehot, bank reform, banking crisis, chartalism, chartalist, Circuit theory, credit money, endogenous money, financial crisis, Fractional Reserves, Georg Friedrich Knapp, Limited Purpose Banking, Lombard Street, MCT, Misesean banking, mmt, modern monetary theory, narrow banking, neo-chartalism, circuitisme |
| JEL: | A1 A10 E0 E00 G1 G2 G21 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:45101&r=pke |
| By: | Dionissi Aliprantis |
| Abstract: | Black males in the United States are exposed to tremendous violence at young ages: In the NLSY97 26 percent report seeing someone shot by age 12, and 43 percent by age 18. This paper studies how this exposure to violence and its associated social isolation affect education and labor market outcomes. I use Elijah Anderson’s ethnographic research on the “code of the street” to guide the specification of a model of human capital accumulation that includes street capital, the skills and knowledge useful for providing personal security in neighborhoods where it is not provided by state institutions. The model is estimated assuming either selection on observables or dynamic selection with permanent unobserved heterogeneity. Counterfactuals from these estimated models indicate that exposure to violence has large effects, decreasing the high school graduation rate between 6.1 and 10.5 percentage points (20 and 35 percent of the high school dropout rate) and hours worked between 3.0 and 4.0 hours per week (0.15 and 0.19 s). |
| Keywords: | Occupational choice ; Human capital ; Income distribution |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1302&r=pke |
| By: | Vernon Loke; Margaret Libby; Laura Choi |
| Abstract: | The Make Your Path (MY Path) initiative provides disadvantaged youth with peer-led financial capability trainings, a savings account at a mainstream financial institution and incentives to set and meet savings goals. The program focuses on youth earning their first paycheck—a critical “teachable moment” to promote savings and connect youth with mainstream financial products. In 2011-12, Mission SF Community Financial Center (Mission SF) tested MY Path by delivering its suite of services to ten agencies participating in San Francisco’s largest youth employment program, the Mayor’s Youth Employment and Education Program (MYEEP). Participants saved an average of $507 over a six-month period and youth demonstrated increases in financial knowledge, reports of positive financial behaviors, and confidence about making financial decisions and doing business with a mainstream financial institution. |
| Keywords: | Financial literacy - United States ; Youth - Employment |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfcw:2013-03&r=pke |