nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2013‒08‒05
eleven papers chosen by
Karl Petrick
Western New England University

  1. Post Keynesian Endogeneity of Money Supply: Panel Evidence By Nayan, Sabri; Ahmad, Mahyudin; Kadir, Norsiah; Abdullah, Mat Saad
  2. The Affordable Care Act: A Hidden Jobs Killer? By Helene Jorgensen; Dean Baker
  3. Financial Engineering: The Simple Way to Reduce Government Debt Burdens By Dean Baker; Sheva Diagne
  4. The Natural Rate Hypothesis: An idea past its sell-by date By Roger E.A. Farmer
  5. South-South Cooperation and Inclusive Growth By Ryan Higgitt
  6. Teaching Students to Make Their Empirical Research Replicable: A Protocol for Documenting Data Mana By Richard Ball; Norm Medeiros
  7. Financial Liberalization and Remittances: Recent Longitudinal Evidence By Bang, James T.; Mitra, Aniruddha; Wunnava, Phanindra V.
  8. Fiscal multipliers in a small euro area economy: How big can they get in crisis times? By Gabriela Lopes de Castro; Ricardo Mourinho Félix; Paulo Júlio; José R. Maria
  9. Are modern financial systems shaped by state antiquity? By James B. Ang
  10. U.S. Regional Poverty Post-2000: The Lost Decade By Partridge, Mark; Rickman, Dan; Tan, Ying; Olfert, M. Rose
  11. Entrepreneurship and Economic Development: Theory, Evidence and Policy By Naudé, Wim

  1. By: Nayan, Sabri; Ahmad, Mahyudin; Kadir, Norsiah; Abdullah, Mat Saad
    Abstract: Post Keynesian economics is actually macroeconomics in a world of uncertainty and endogenous money. Post Keynesians posit that money supply in a market oriented production economy is endogenous or endogenously determined (rather than exogenous as claimed by Monetarists). Money supply is said to be endogenous if it is determined within the economic system itself. The present paper investigates this theory using a panel dataset of 177 countries from year 1970-2011 utilising dynamic panel data analysis and has found that money supply is endogenous as proposed by Post Keynesian theorists.
    Keywords: Post-Keynesians; Endogeneity; Panel Data Analysis; System GMM.
    JEL: E12 E51
    Date: 2013–07–30
  2. By: Helene Jorgensen; Dean Baker
    Abstract: Opponents of the ACA have labeled the health care bill a jobs killer. It seems implausible that the bill could be expected to have much impact on employment except among the relatively small number of firms that are near the 50-worker cutoff. However the bill does provide a clear incentive to reduce workers’ hours below 30 per week and many employers claim to be making such reductions in hours. This issue brief looks at data from the Current Population Survey and finds only a small number (0.6 percent of the workforce) of workers report working just below the 30-hour cutoff in the range of 26-29 hours per week. Furthermore, the number of workers who fall in this category was actually lower in 2013 than in 2012, the year before the sanctions would have applied.
    Keywords: debt, deficit, fed, debt-to-GDP ratio, government bond, GDP growth
    JEL: I I1 I18 J J3 J38 H H3
    Date: 2013–07
  3. By: Dean Baker; Sheva Diagne
    Abstract: Despite being thoroughly debunked, concern over high government debt-to-GDP ratios has hardly disappeared from policy debates. As such, an overlooked possibility for reducing a high debt burden is simply buying back bonds at a discount when interest rates rise, as is widely predicted. This issue brief calculates the potential savings to the government through a hypothetical buyback of government debt in 2017. Long-term bonds that are issued at low interest rates will sell at substantial discounts to their face value if market interest rates rise. Looking at publicly held marketable debt issued as of the end of February 2013, the face value of the debt is $3,857 billion. The projected market value of this debt is $3,399 billion for an implied debt reduction of $458 billion, or just under 2.3 percent of the GDP projected for 2017. The interest burden on the Treasury will not change through these transactions. The only effect will be to lower the official value of outstanding debt. However if people in policy positions continue to attach importance to this number then this sort of debt exchange should rank high on the list of policy options. There is no less costly way to eliminate close to half a trillion dollars in debt.
    Keywords: debt, deficit, fed, debt-to-GDP ratio, government bond, GDP growth
    JEL: E E3 E31 E6 E5 G
    Date: 2013–07
  4. By: Roger E.A. Farmer
    Abstract: Central banks throughout the world predict inflation with new-Keynesian models where, after a shock, the unemployment rate returns to its so called “natural rate’. That assumption is called the Natural Rate Hypothesis (NRH). This paper reviews a body of work, published over the last decade, which is critical of the NRH. I argue that the NRH does not hold in the data and I provide an alternative paradigm that explains why it does not hold. I replace the NRH with the assumption that the animal spirits of investors are a fundamental of the economy and I show how to operationalize that idea by constructing an empirical model that outperforms the new-Keynesian Phillips curve. I model animal spirits with a new fundamental that I call the belief function.
    JEL: E0 E24 E52
    Date: 2013–07
  5. By: Ryan Higgitt (IPC-IG)
    Abstract: Ongoing criticism over the efficacy of a modern development model characterised by an imbalance of power with respect to terms of action has in recent years spawned discussion regarding the utility of ?South-South cooperation? as a potential new development paradigm. We agree with many of the critiques levelled at development in its current form, particularly when considered in the context of the clearly growing disparity across the globe between those who have and those who have not (see Ortiz and Cummins, 2011). But we also have reservations related to questions as to what exactly South-South cooperation means, and indeed worry that this ?new? paradigm is not new at all if it merely reinforces a hegemonic view of two ?worlds?, a North and a South. The primary objective of this Working Paper is thus to contribute to an understanding of how South-South cooperation might distinguish itself as a genuine alternative to prevailing macro-level development approaches. (?)
    Keywords: Inclusive Growth, South-South
    Date: 2013–08
  6. By: Richard Ball (Haverford College); Norm Medeiros (Haverford College)
    Abstract: This presentation will describe a protocol we have developed for teaching students conducting empirical research to document their work in such a way that their results are completely reproducible and verifiable. The protocol is comprised primarily of creating and assembling a collection of electronic documents—-including raw data files, do-files, and metadata files. The guiding principle is that an independent researcher, using only the data and information contained in these files, should be able to replicate every step of the data management and analysis that generated their empirical results. Students in our introductory statistics classes, as well as our senior advisees, have had a great deal of success using the protocol to document the data processing and analysis involved in their research papers and theses. There is a great deal of evidence [see Ball and Medeiros (2012) and McCullough and McKitrick (2009)] that, across the social sciences, professional norms and common practices with respect to documenting empirical research are deficient. We hope that teaching good practices to our students will help strengthen the professional norm that researchers have an ethical responsibility to ensure that their statistical results can be independently replicated.
    Date: 2013–08–01
  7. By: Bang, James T. (St. Ambrose University); Mitra, Aniruddha (Bard College); Wunnava, Phanindra V. (Middlebury College)
    Abstract: This paper investigates the impact of financial liberalization on remittances to 84 countries over five-year intervals from 1990-2005 based on the difference-GMM method of Arellano and Bond (1991). We find that various dimensions of financial reform impact remittances differently. Increased economic freedom in the financial sector, captured by absence of direct government control over the allocation of credit, has a positive and immediate impact. Improved robustness of financial markets, captured by the effective and apolitical regulations and other policies that enhance financial markets, has a negative, lagged effect. The net combined impact of these effects suggests that the long-run effect of an across-the-board reform on remittances is slightly negative. Our results suggest that countries using liberalization to cope with external imbalances will find that granting greater financial freedom will help by attracting higher levels of remittances. However, countries using liberalization to reduce their exposure to external risks will find that policies that enhance the robustness of domestic financial markets to be more effective.
    Keywords: property rights, financial liberalization, remittances
    JEL: F22 O15 P48
    Date: 2013–07
  8. By: Gabriela Lopes de Castro; Ricardo Mourinho Félix; Paulo Júlio; José R. Maria
    Abstract: Using PESSOA, a small open economy DSGE model, we analyze the size of short-runfiscal multipliers associated with fiscal consolidation under two distinct alternative scenarios, viz "normal times" and "crisis times." The crisis times scenario embodies a higher share of hand-to-mouth households, stronger nominal rigidities, and more severe financial frictions, which purportedly better refflect the underlying economic environment during the "Great Recession." Results show that fiscal multipliers can be twice as large in crisis times, being approximately 2 for a government consumptionbased fiscal consolidation in the first year. One-year ahead effects are also substantially larger if this type of consolidation is performed in crisis times. Revenue-based fiscal consolidations are also more recessive in crisis times, though the differences against normal times are less pronounced.
    JEL: E62 F41 H62
    Date: 2013
  9. By: James B. Ang
    Abstract: We demonstrate that existing differences in financial development between countries can be explained by the cumulative variations in their levels of state experience since 1 AD. This dimension of early historical development has not been considered so far in studies that analyze the determinants of financial development. The estimation allows for all major theories established in the literature as possible explanations for the disparity of financial development across the globe. Significance of state antiquity is robust to the use of alternative indicators of financial development, the consideration of different lengths and periods of statehood, and controlling for a range of variables or country characteristics. Our results highlight the important role of statehood in propelling financial system development, and thus provide some support to the view that historically determined differences in the early-start developmental advantage provide the basis for explaining the fundamental sources of variations in financial development between countries today.
    Keywords: State antiquity; Financial development
    JEL: H70 O10 O40
    Date: 2013–07
  10. By: Partridge, Mark; Rickman, Dan; Tan, Ying; Olfert, M. Rose
    Abstract: The strong U.S. real income gains and reductions in poverty during the 1990s were largely erased in the following decade, which contained two economic recessions and tepid job growth otherwise. Areas most affected by weak U.S. economic performance could be expected to also have experienced the largest increases in poverty, particularly if interregional labor market adjustment is increasingly limited. We examine this issue, finding that not only was regional poverty affected by regional labor demand shocks, the effect was stronger post-2000, particularly in the long run. Consistent with the poverty results are findings of greater post-2000 regional labor demand effects on employment rates and reduced population adjustments to asymmetric labor demand shocks.
    Keywords: US Poverty; Spatial Equilibrium; Great Recession
    JEL: I32 R11 R23
    Date: 2013–07–21
  11. By: Naudé, Wim (Maastricht School of Management)
    Abstract: This paper provides an overview of the state of the art of the intersection of development economics and entrepreneurship. Given the relative neglect of entrepreneurship by development scholars it deals with (i) recent theoretical insights from the intersection of entrepreneurship and development studies; (ii) the empirical evidence on the relationship between entrepreneurship and development; and (iii) fresh insights for entrepreneurship policy for development that emerges from recent advanced in this area, including female entrepreneurship in developing countries.
    Keywords: entrepreneurship, development, small business, private sector development, innovation, business
    JEL: M13 O10 O17 O40
    Date: 2013–07

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