nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2013‒06‒04
eighteen papers chosen by
Karl Petrick
Western New England University

  1. "Toward a Post-Keynesian Political Economy for the 21st Century: General Reflections and Considerations on an Era Ripe for Change" By C. J. Polychroniou
  2. "The Tragedy of Greece: A Case against Neoliberal Economics, the Domestic Political Elite, and the EU/IMF Duo" By C. J. Polychroniou
  3. "More Swimming Lessons from the London Whale" By Jan Kregel
  4. Labor Busted, Rising Inequality and the Financial Crisis of 1929: An Unlearned Lesson By Jon D. Wisman
  5. "The Problem of Excess Reserves, Then and Now" By Walker F. Todd
  6. The 2015 Debt Crisis By Paul Ladd
  7. "From Safety Nets to Economic Empowerment: Is There Space to Promote Gender Equality in the Evolution of Social Protection?" By Rania Antonopoulos
  8. "The New Rome: The EU and the Pillage of the Indebted Countries" By Jan Kregel
  9. Goodhart, Charles A.E. and Tsomocos, Dimitros P.: The challenge of financial stability: a new model and its applications By Jean-Bernard Chatelain
  10. "Lessons from the Cypriot Deposit Haircut for EU Deposit Insurance Schemes" By Jan Kregel
  11. The Price Puzzle: Fact or Artefact? By Philip Arestis; Michail Karoglou; Kostas Mouratidis
  12. "Modeling the Housing Market in OECD Countries" By Philip Arestis; Ana Rosa Gonzalez
  13. "Employment Recovery? after the Great Recession" By Michalis Nikiforos
  14. Green Equity: Environmental Justice for more Inclusive Growth By Kishan Khoday; Leisa Perch
  15. Growing Green with Equity: Our Approach By Michael MacLennan
  16. The "Greening" of Industrial Policy, Headwinds and a Possible Symbiosis By Karl Aiginger
  17. Global Goals as a Policy Tool: Intended and Unintended Consequences By Sakiko Fukuda-Parr
  18. Human Development in India: Costs of Inequality By M. H. Suryanarayana; Ankush Agrawal

  1. By: C. J. Polychroniou
    Abstract: The global economy is in trouble. Indeed, the era of global neoliberalism, while still supreme, is fraught with serious problems and contradictions, as evidenced by both the recent global financial crisis and the inability of advanced economies to maintain steady growth and improve the condition of citizens. Global neoliberalism suppresses wages, increases inequality, and destroys the social fabric. It is a socioeconomic system in dire need of a replacement—and the responsibility falls clearly on progressive economics to chart a full-fledged alternative course.
    Date: 2013–03
  2. By: C. J. Polychroniou
    Abstract: The crisis in Greece reflects the deep structural problems of the country's economy, its bureaucratic inefficiency, and a pervasive culture of corruption. But it also reflects the deadly failure of the neoliberal project, which has become institutionalized throughout the European Union's operational framework-with the International Monetary Fund the world's single most powerful enforcer of market fundamentalism.
    Date: 2013–03
  3. By: Jan Kregel
    Abstract: This policy brief by Senior Scholar and Program Director Jan Kregel builds on an earlier analysis (Policy Note 2012/6) of JPMorgan Chase and the actions of the "London Whale," and what this episode reveals about the larger risks inherent in the financial system. It is clear that the Dodd-Frank Act failed to prevent massive losses by one of the world's largest banks. This is undeniable evidence that work remains to be done to reform the financial system. Toward this end, Kregel reviews the findings of a recent report by the Senate Permanent Subcommittee on Investigations and expands on the lessons that we can draw from the evolution of the London Whale episode.
    Date: 2013–04
  4. By: Jon D. Wisman
    Abstract: Although the Great Depression and the financial crisis of 1929 that triggered it have been endlessly studied, there is little consensus and even much puzzlement as to why they occurred. This article claims that beneath the many causal factors that have been advanced lie deeper underlying determining forces that have received less notice: wage stagnation and the dramatic increase in inequality following World War I. Wage stagnation and rising inequality fueled three dynamics that set the stage for a financial crisis – the focus of this study -- and contributed to the duration of the depression that followed. The first is that consumption was constrained by the smaller share of total income accruing to workers, thereby restricting investment opportunities in the real economy. Flush with greater income and wealth, the elite flooded financial markets with credit, helping keep interest rates low and encouraging the creation of new credit instruments, some of which recycled the rich's surplus assets as debt to those less well off. The second dynamic is that greater inequality pressured households to find ways to consume more to maintain their relative social status. As a result, household saving rates declined, households took on greater debt, and may have worked longer hours. The third dynamic is that, as the rich took larger shares of income and wealth, they gained relatively more command over everything, including ideology. Reducing taxes on the rich, favoring business over labor, and failing to regulate newly evolving credit instruments flowed out of this ideology.
    Keywords: inadequate demand, consumer externalities, social respectability, speculation, financial innovation, ideology
    JEL: E21 E44 G01
    Date: 2013
  5. By: Walker F. Todd
    Abstract: This working paper looks at excess reserves in historical context and analyzes whether they constitute a monetary policy problem for the Federal Reserve System (the "Fed") or a potential-ly inflationary problem for the rest of us. Generally, this analysis shows that both absolute and relative sizes of excess reserves are a big problem for the Fed as well as the general public because of their inflationary potential. However, like all contingencies, the timing and extent of the damage that reserve-driven inflation might cause are uncertain. It is even possible today to find articles in both scholarly circles and the popular press arguing either that the inflationary blow-off might never happen or that an increasing tendency toward prolonged deflation is the more probable outcome.
    Keywords: Excess Reserves; Federal Reserve; Fed; European Central Bank; ECB; Quantitative Easing; Monetary Stimulus
    JEL: E51 E52 E58
    Date: 2013–05
  6. By: Paul Ladd (Poverty Practice, UNDP Bureau for Development Policy)
    Keywords: The 2015 Debt Crisis
    Date: 2012–06
  7. By: Rania Antonopoulos
    Abstract: Social protection systems comprise public policies designed to prevent or alleviate economic insecurity and poverty. Throughout the developing world, social protection strategies and the dialogue surrounding them have recently been undergoing an important evolution. In this policy brief, Senior Scholar and Director of the Gender Equality and the Economy program Rania Antonopoulos highlights the opportunities and challenges for promoting gender equality and empowerment within this shifting policy landscape. Developed with financial support from the United Nations Development Programme, this brief is intended as an advocacy tool in the service of amplifying gender-informed policy considerations in country-level social protection debates.
    Date: 2013–04
  8. By: Jan Kregel
    Abstract: The European Union (EU) is a treaty-based organization that was set up after World War II as a means of putting an end to a favorite practice of the Europeans: sorting out their national differences by engaging in bloody warfare. The European experiment—the formation of a Common Market, which led eventually to economic and monetary union—has been linked to some remarkable outcomes: Europe has experienced its longest period of peace since the end of World War II, and war among European member-states now seems highly unlikely. Naturally, senior EU officials never miss an opportunity to remind the public of this achievement whenever the policies of the "new Rome" are questioned by a European citizenship fed up with authoritarian decision-making processes by the EU core, bank bailouts masquerading as national bailouts, austerity policies—and what amounts to the pillaging of the debtor countries by the center.
    Date: 2013–05
  9. By: Jean-Bernard Chatelain (CES, EEP-PSE, UP1)
    Abstract: This review of the book "The Challenge of Financial Stability: A New Model and its Applications" by Goodhart C.A.E. and Tsomocos D.P. highlights the potential of the framework of strategic partial default of banks with credit chain on the interbank market for further theoretical and applied research on financial stability.
    Date: 2013–05
  10. By: Jan Kregel
    Abstract: In March of this year, the government of Cyprus, in response to a banking crisis and as part of a negotiation to secure emergency financial support for its financial system from the European Union (EU) and International Monetary Fund (IMF), proposed the assessment of a tax on bank deposits, including a levy (later dropped from the final plan) on insured demand deposits below the 100,000 euro insurance threshold. An understanding of banks’ dual operations and of the relationship between two types of deposits—deposits of customers’ currency and coin, and deposit accounts created by bank loans—helps clarify some of the problems with the Cypriot deposit tax, while illuminating both the purposes and limitations of deposit insurance.
    Date: 2013–04
  11. By: Philip Arestis (Department of Land Economics, University of Cambridge); Michail Karoglou (Aston Business School, Aston University); Kostas Mouratidis (Department of Economics, The University of Sheffield)
    Abstract: A conventional finding of recursive structural VAR (SVAR) analyses is the price puzzle namely the positive relationship between interest rates and inflation. We employ a Markov regime-switching structural VAR (MRS-SVAR) to investigate whether the price puzzle is present at regimes where there is violation of the Taylor principle. Our results suggest that the price puzzle is a regime-dependent phenomenon driven by passive monetary policy and Choleski identifying restrictions.
    Keywords: monetary policy; price puzzle; Markov regime-switching; structural VAR
    JEL: C32 C34 C51 E50 E52 E58
    Date: 2013
  12. By: Philip Arestis; Ana Rosa Gonzalez
    Abstract: Recent episodes of housing bubbles, which occurred in several economies after the burst of the United States housing market, suggest studying the evolution of housing prices from a global perspective. We utilize a theoretical model for the purposes of this contribution, which identifies the main drivers of housing price appreciation—for example, income, residential investment, financial elements, fiscal policy, and demographics. In the second stage of our analysis, we test our theoretical hypothesis by means of a sample of 18 Organisation for Economic Co-operation and Development (OECD) countries from 1970 to 2011. We employ the vector error correction econometric technique in terms of our empirical analysis. This allows us to model the long-run equilibrium relationship and the short-run dynamics, which also helps to account for endogeneity and reverse-causality problems.
    Keywords: Empirical Modeling; Housing Market; Vector Error Correction Modeling; OECD Countries
    JEL: C22 R31
    Date: 2013–05
  13. By: Michalis Nikiforos
    Abstract: This policy note discusses the prospects for job creation in the US based on the most recent Levy Economics Institute Strategic Analysis report, Is the Link between Jobs and Output Broken? The results of our analysis confirm the continued weakness of the US economy in terms of job creation—a phenomenon that has come to be known as a "jobless recovery." We argue that to understand the problem we must look beyond the unemployment rate, which can conceal changes in the labor force. A prolonged recession can discourage workers, causing them to drop out of the labor market, thus lowering the unemployment rate without increasing employment. Therefore, the total number of people employed should be considered in tandem with the unemployment rate.
    Date: 2013–04
  14. By: Kishan Khoday (UNDP); Leisa Perch (International Policy Centre for Inclusive Growth)
    Abstract: This June sees world leaders and civil society convene for the UN Conference on Sustainable Development (Rio+20). It will focus on reviewing progress in achieving the goals of the original 1992 UN Conference on Environment and Development (the 1992 Rio Earth Summit). A main issue at the heart of the sustainable development paradigm, and the Rio+20 Summit, will be the extent to which the world has been able to find synergies between dual challenges of poverty reduction and ecological protection. As we look back over the past twenty years, an important trend has been the rise of rights-based approaches and a transnational environmental justice movement in which citizens confront both the State and the international community on the impacts of growth on social and ecological well-being. The escalating development challenges, defined by the nexus between poverty and ecological degradation, are also conditioned by the lack of accountability and rule of law surrounding natural resource use and the control of pollution. Vulnerable communities are the ones who most suffer the burden of ecological change, while being least able to mobilize against these trends. For the poor, unsustainable resource use and pollution bring risks to their ability to earn a livelihood and live a healthy life; it is the new face of long-term structural inequality. (...)
    Keywords: Green Equity: Environmental Justice for more Inclusive Growth
    Date: 2012–05
  15. By: Michael MacLennan (IPC-IG)
    Abstract: The real-time opportunities for sustainable inclusive green growth within the Southern African Development Community (SADC) are being explored as part of the development of a Green Guide for SADC parliamentarians. The collaborative partnership between the Rural and Sustainable Development team at the UNDP International Policy Centre for Inclusive Growth (IPC-IG) and the SADC Parliamentary Forum, which has been fully supported by the Climate Development Knowledge Network (CDKN), dates back to July 2011. The Green Guide, the primary output of this collaboration, will outline the compelling case for further implementation of contextappropriate inclusive green growth policies to decision-makers from a variety of departments and ministries, with the aim of encouraging intersectoral coordination, policy coherence and programme convergence. (?)
    Keywords: Growing Green with Equity: Our Approach
    Date: 2013–05
  16. By: Karl Aiginger (WIFO)
    Abstract: The importance of manufacturing for industrialised countries has been reappraised, specifically in the wake of the financial crisis and of China's rise to world no. 1 in manufacturing. A "new industrial policy" should bolster reindustrialisation, different from the old selective and interventionist one, with proposals by academia, by the European Commission and many national policy makers in the USA, UK and France. It should be pro competitive, in line with societal needs, integrated with innovation and regional policy building on competitive strength and with "sustainability at centre stage". Environmental standards should no longer be considered as an obstacle to competitive manufacturing but could constitute a driver of green growth. Europe sets targets for increasing energy efficiency, increasing shares of renewable energy and cutting emission first for 2020 and then for 2050, demanding the reduction of greenhouse gases by 80 to 90 percent, based on new technologies and prices of carbon dioxide of 250 € per ton. Headwinds to this ambitious path come from low gas prices specifically in the USA, based on a new extraction technology and from the breaking down of the European emission trading. The question now raises whether Europe has to cope with low gas prices as to prevent carbon leakage, or whether Europe can stick to the goals of the envisaged integrated and systemic industrial policy as to raise energy efficiency as well as to reduce carbon emissions by new technologies. A "new industrial policy" would match the US cost advantage in energy by closing the technology deficit, improving skills and going for excellence in energy efficiency and clean technologies.
    Keywords: New industrial policy, climate change, carbon leakage
    Date: 2013–05–17
  17. By: Sakiko Fukuda-Parr (The New School University, New York)
    Abstract: Despite the increasing use and influence of global goals, little has been written about goal setting as a particular type of policy instrument in global governance. According to the UN intellectual history project (jolly et al, 2009), goal setting originated in the 1960s and made a major contribution to shaping policy agendas and action. But how and whom does goal setting influence? Goals are set without control over the means of implementation. In an IPC-IG Working Paper, I use ideas from the Sociology of Numbers on ?indicators as a technology of governance? (Merry, 2009) to explore the mechanisms by which global goals create incentives for action and frame thinking, thereby exerting both intended and unintended influence on policy agendas. This One Pager highlights the key points. (?)
    Keywords: Global Goals as a Policy Tool: Intended and Unintended Consequences
    Date: 2013–04
  18. By: M. H. Suryanarayana (International Poverty Centre); Ankush Agrawal (Indian Institute of Technology Delhi)
    Abstract: Economic growth with income redistribution has been a basic objective of economic development policy in India. Such a strategy seeks to exploit the potential of development programmes for poverty reduction and welfare gains by reducing the costs due to inequality in income distribution. The state of Kerala in India provides empirical evidence to show how it is possible to both achieve growth and improve income distribution through human development. (?)
    Keywords: Human Development in India: Costs of Inequality
    Date: 2013–05

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