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on Post Keynesian Economics |
| By: | Srinivas Yanamandra |
| Abstract: | This paper examines the emerging challenges to the art of monetary policymaking using the case study of the Reserve Bank of India (RBI) in light of developments in the Indian economy during the last decade (2003-04 to 2013-14). The paper uses Hyman P. Minsky's financial instability hypothesis as the conceptual framework for evaluating the endogenous nature of financial instability and its potential impact on monetary policymaking, and addresses the need to pursue regulatory policy as a tool that is complementary to monetary policy in light of the agenda of reforms put forward by Minsky. It further reviews the extensions to the Minskyan hypothesis in the areas of setting fiscal policy, managing cross-border capital flows, and developing financial institutional infrastructure. The lessons learned from the interplay of policy choices in these areas and their impact on monetary policymaking at the RBI are presented. |
| Keywords: | Financial Crisis; Central Bank; Monetary Policy; Bank Regulation; Fiscal Policy; Exchange Rate Policy; Financial Institution Infrastructure |
| JEL: | E58 G01 G28 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_820&r=pke |
| By: | Giulio Guarini (University of Tuscia, Viterbo, Italy); Giuseppe Garofalo (University of Tuscia, Viterbo, Italy); Alessandro Federici (ENEA, Italy) |
| Abstract: | The Europe 2020 Strategy has been built on three pillars: smart, sustainable and inclusive growth. The aim of the paper is to provide, thanks to Dynamic Panel data models, an econometric analysis of the potential cumulative circle among the abovementioned three pillars, with a specific focus on how labour productivity and environmental intensity interact with each other, and how they may help improving employment. With reference to the effect of sustainable factors on smart factors, main results of this paper confirm the 'dual externality principle': eco-innovations may both provide R&D spillovers and reduce environmental negative externalities; depending on the Porter’s hypothesis, environmental regulations may stimulate eco-innovation in order to reduce regulation costs. Furthermore, an increase of energy intensity tends to stimulate cost-saving innovations. Concerning the effect of smart factors on sustainable factors, the 'pollution haven hypothesis' is confirmed: trade openness increases pollution because of more relaxed environmental regulation, delocalization and specialization. Finally, the positive impact of smart and sustainability factors on employment depends on the complementarity between the first two pillars. Europe 2020 goals are essential in order to overcome the current economic, social, and ecological crisis: this paper highlights how this implies to go beyond the widely adopted 'austerity policy framework' and to implement some proposals able to generate, stimulate and sustain the abovementioned cumulative circle. Main political points are: the proactive role of public institutions, to avoid innovation market failures and to generate an 'innovation multiplier' starting from public investments; the territorial perspective of strategy; the coordination among macroeconomic policies on the one hand, and industrial, innovation, environmental, and trade policies on the other. |
| Keywords: | inclusion, innovation, sustainability, Europe 2020 Strategy |
| JEL: | O3 O4 Q5 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2014-39&r=pke |
| By: | Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich |
| Abstract: | In this work we analyze the short- and long-run effects of fiscal austerity policies, employing an agent-based model populated by heterogeneous, boundedly-rational firms and banks. The model, in line with the family of "Keynes+Schumpeter" formalism, is able to account for a wide array of macro and micro empirical regularities. In particular, it endogenously generates self-sustained growth patterns together with persistent economic fluctuations punctuated by deep downturns. On the policy side, we find that austerity policies considerably harm the economy, by increasing output volatility, unemployment, and the incidence of crises. In addition, they depress innovation and the diffusion of new technologies, thus reducing long-run productivity and GDP growth. Finally, we show that "discipline-guided" fiscal rules are self-defeating, as they do not stabilize public finances, but, on the contrary, they disrupt them. |
| Keywords: | agent-based model, fiscal policy, economic crises, austerity policies, disequilibrium dynamics |
| Date: | 2014–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2014/22&r=pke |
| By: | Mariolis, Theodore; Soklis, George |
| Abstract: | This paper estimates the ‘static Sraffian multiplier’ for the Greek economy using data from the Supply and Use Table for the year 2010. It is found that (i) an effective demand management policy could be mainly based on the service sector; and (ii) the whole economic system, and especially its industry sector, is heavily dependent on imports. The results seem to be in accordance with the observed deep recession of the Greek economy and, furthermore, suggest that a change in its intersectoral structure is necessary. |
| Keywords: | Greek economy; Joint production; Management of effective demand; Sraffian multiplier; Supply and Use Tables |
| JEL: | C67 D57 E11 E61 |
| Date: | 2014–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60253&r=pke |
| By: | Barrientos, Armando; Amann, Ed |
| Abstract: | Brazil.s recent growth has been intensely pro-poor, and both poverty and inequality have declined significantly in the last decade. It has been suggested that Brazil.s unexpected successes are the outcome of a new model of development. The paper argues th |
| Keywords: | Brazil, inclusive growth, development, poverty |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2014-134&r=pke |
| By: | Mark Weisbrot; Jake Johnston; Stephan Lefebvre |
| Abstract: | The Brazilian economy has gone through a significant transformation during the past decade. Following nearly a quarter-century with very little growth in per capita GDP, there was a major change beginning in 2004. GDP per person (adjusted for inflation) grew at a rate of 2.5 percent annually from 2003-2014, more than three times faster than the 0.8 percent annual growth of the prior government (1995-2002). This growth rate was achieved in spite of the 2008-09 global financial crisis and recession, which pushed Brazil into recession in 2009; and this comparison includes the slowdown of the past few years. Over the past decade there have also been sharp declines in unemployment, poverty, and extreme poverty, as well as a large shift towards less inequality in the distribution of income gains. This paper looks at these changes as well as government policy changes that have contributed to them. It also looks at the economic slowdown over the past few years, and the role of macroeconomic policy since 2011. |
| Keywords: | brazil, economic growth, macroeconomic policy |
| JEL: | E E0 F F1 F13 F17 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2014-14&r=pke |
| By: | Alice Fabre (Aix Marseille University (Aix Marseille School of Economics, CNRS & EHESS)); Stéphane Pallage (ESG UQAM, CIRPEE and Département des Sciences Economiques, Université du Québec `a Montréal); Christian Zimmermann (Federal Reserve Bank of St-Louis, IZA, RCEA and CESifo) |
| Abstract: | In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a dynamic equilibrium model with savings calibrated to the United States for 1990 and 2011, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need. |
| Keywords: | universal basic income, idiosyncratic shocks, unemployment insurance, heterogeneous agents, Moral Hazard |
| JEL: | E24 D7 J65 |
| Date: | 2014–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1451&r=pke |
| By: | Dean Baker |
| Abstract: | In January of 2013 nearly every worker in the country saw their payroll tax increase by 2.0 percentage points. The payroll tax holiday that had been put in place at the start of 2011 ended in December of 2012, leading to a jump in the Social Security tax from 10.4 percent to 12.4 percent of earnings up to the taxable limit. This was an extraordinarily large increase in the payroll tax. Past increases had generally been phased in gradually. For example, from 1980 to 1990 the tax rate was increased by a total of 2.24 percentage points; however in no year did the rate rise by more than 0.72 percentage points, just over one-third of the 2013 increase.3 If the public was strongly opposed to any tax increases, it would be expected that one as large as the 2013 rise in the Social Security tax would lead to considerable anger, especially given the weakness of the labor market which was still very much feeling the impact of the 2008-2009 recession at that point. |
| Keywords: | social security, payroll tax |
| JEL: | H H5 H55 H2 H3 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2014-15&r=pke |
| By: | Rodrik, Dani |
| Abstract: | Africa’s recent growth performance has raised expectations of a bright economic future for the continent after decades of decline. Yet there is a genuine question about whether Africa’s growth can be sustained, and if so, at what level. The balance of the evidence suggests caution on the prospects for high growth. While the region’s fundamentals have improved, the payoffs to macroeconomic stability and improved governance are mainly to foster resilience and lay the groundwork for growth, rather than to generate productivity growth on their own. The traditional engines behind rapid growth, structural change and industrialization, seem to be operating at less than full power. If African countries do achieve growth rates substantially higher, they will have to do so pursuing a growth model that is different from earlier miracles based on industrialization. This might be agriculture-led or services-led growth, but it will look quite different than what we have seen before. |
| Keywords: | Africa; economic growth |
| JEL: | O11 O55 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10005&r=pke |
| By: | Strunz, Sebastian; Klauer, Bernd; Ring, Irene; Schiller, Johannes |
| Abstract: | Ecological Economics inherently faces a challenge akin to sailing between Scylla and Charybdis. In Greek mythology these are two monsters located on opposite sides of a narrow strait, and falling victim to one or other of them is unavoidable. In the recurring process of establishing and refining its conceptual foundations, Ecological Economics runs the risk of, on the one hand, losing important insights by trying to be radically different from mainstream economics and, on the other hand, becoming a redundant appendix to mainstream environmental economics by routinely applying its concepts and methods. We argue that avoiding both fallacies is possible by using Ecological Economics' orientation towards sustainability as a guiding principle. The scientist's power of judgment supports her decision concerning which methods are suitable for tackling a given sustainability problem. The intersubjective quality of judgment prevents the resulting methodological pluralism from drifting toward arbitrariness. |
| Keywords: | ecological economics,methodological pluralism,power of judgment,ontology,sustainability |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ufzdps:262014&r=pke |
| By: | Merrouche, Ouarda; Nier, Erlend |
| Abstract: | This paper investigates empirically three potential drivers of financial imbalances ahead of the global financial crisis: rising global imbalances (capital flows); loose monetary policy; and inadequate supervision and regulation. We perform panel data regressions for OECD countries from 1999 to 2007 to explore the relative importance of these factors, as well as the extent to which they might have interacted in fuelling the build-up. We find that the build-up of financial imbalances was driven by capital inflows and an associated compression of the spread between long and short rates. The effect of capital inflows on the build-up was amplified where the supervisory and regulatory environment was relatively weak. In contrast, differences in monetary policy did not significantly affect differences across countries in the build-up of financial imbalances ahead of the crisis. |
| Keywords: | global imbalances; monetary policy; supervision and regulation |
| JEL: | E5 F3 G28 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10015&r=pke |