|
on Post Keynesian Economics |
| By: | Alberto Botta (Department of Political and Social Sciences, University of Pavia and Department of Law and Economics, Mediterranean University of Reggio Calabria) |
| Abstract: | In this paper we study the role of the eurozone’s institutional design in determining the sovereign debt crisis of the peripheral euro countries by means of a post-Keynesian eurozone center-periphery model. Within this framework, three points are formally addressed. (1) The incomplete nature of the eurozone with respect to a full-fledged federal union has significantly contributed to generating diverging trends and conflicting claims between central and peripheral eurozone countries in the aftermath of the 2007- 2008 financial meltdown. (2) Center-periphery diverging trends may disappear and a systemic crisis may occur should financial turbulences deepen in big peripheral economies, possibly spreading to the center. (3) Fiscal austerity does not address the core problems of the eurozone. The creation of a European federal government, capable of implementing anti-cyclical fiscal policies through a federal budget, and of a government banker constitutes the most promising solution to stabilize the macroeconomic picture of peripheral countries and to tackle the crisis. The unlimited bond-buying program recently launched by the ECB is a positive albeit mild step in the right direction away from the extreme monetarism that shaped eurozone institutions thus far. |
| Keywords: | eurozone debt crisis, post-Keynesian center-periphery model |
| JEL: | E02 H63 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0044&r=pke |
| By: | Greg Hannsgen |
| Abstract: | Should shocks be part of our macro-modeling tool kit—for example, as a way of modeling discontinuities in fiscal policy or big moves in the financial markets? What are shocks, and how can we best put them to use? In heterodox macroeconomics, shocks tend to come in two broad types, with some exceptions for hybrid cases. What I call Type 1 shocks are one-time exogenous changes in parameters or variables. They are used, for example, to set computer simulations in motion or to pose an analytical question about dynamic behavior outside of equilibrium. On the other hand, Type 2 shocks, by construction, occur at regular time intervals, and are usually drawn at random from a probability distribution of some kind. This paper is an appreciation and a survey of shocks and their admittedly scattered uses in the heterodox macro literature, along with some proposals and thoughts about using shocks to improve models. Since shocks of both types might appear at times to be ad hoc when used in macro models, this paper examines possible justifications for using them. |
| Keywords: | Shocks; Discontinuity; Dynamic Macro Models; Heterodox Macroeconomics; Growth and Fluctuations; Simulation Methodology |
| JEL: | B40 E12 E17 E30 E60 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_766&r=pke |
| By: | Paul Castaneda Dower (New Economic School); Andrei Markevich (New Economic School and Department of Economics, University of Warwick) |
| Abstract: | We use mass mobilization for World War I as an exogenous source of variation in the labor force to test the extent of agricultural surplus in one of the most quintessential examples of labor surplus, late imperial Russia. We construct district-level panel data describing agricultural production in the Russian Empire before and during the World War I. We show that districts that experienced greater mass mobilization responded by decreasing area under crops. We next demonstrate the differential effects of mobilization for commune and private farm production, peak and slack season production and cereals and animal husbandry production. Taken together, these results suggest that peasants responded to mass mobilization in a dramatic way. We estimate the upper bound of labor surplus in the agricultural sector to be significantly lower than previous estimates; however, our estimate is conditional on this peculiar pattern of labor removal. |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0196&r=pke |
| By: | Enrico Spolaore (Tufts University, NBER, CESIfo and CAGE) |
| Abstract: | Europe’s monetary union is part of a broader process of integration that started in the aftermath of World War II. In this “political guide for economists” we look at the creation of the euro within the bigger picture of European integration. How and why were European institutions established? What are the goals and determinants of European Integration? What is European integration really about? We address these questions from a political-economy perspective, building on ideas and results from the economic literature on the formation of states and political unions. Specifically, we look at the motivations, assumptions, and limitations of the European strategy, initiated by Jean Monnet and his collaborators, of partially integrating policy functions in a few areas, with the expectation that more integration will follow in other areas, in a sort of chain reaction towards an “ever-closer union.” The euro with its current problems is a child of that strategy and its limits. |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cccrwp:2013-04-ccr&r=pke |
| By: | Anat Bracha (Federal Reserve Bank of Boston); Donald J. Brown (Dept. of Economics, Yale University) |
| Abstract: | The equilibrium prices in asset markets, as stated by Keynes (1930): "...will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced." We propose a descriptive theory of finance explicating Keynes' claim that the prices of assets today equilibrate the optimism and pessimism of bulls and bears regarding the payoffs of assets tomorrow. This equilibration of optimistic and pessimistic beliefs of investors is a consequence of investors maximizing Keynesian utilities subject to budget constraints defined by market prices and investor's income. The set of Keynesian utilities is a new class of non-expected utility functions representing the preferences of investors for optimism or pessimism, defined as the composition of the investor's preferences for risk and her preferences for ambiguity. Bulls and bears are defined respectively as optimistic and pessimistic investors. (Ir)rational exuberance is an intrinsic property of asset markets where bulls and bears are endowed with Keynesian utilities. |
| Keywords: | Keynes, Bulls and bears, Expectations, Asset markets |
| JEL: | D81 G11 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1898&r=pke |
| By: | AfDB |
| Date: | 2013–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:470&r=pke |