nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒02‒29
seven papers chosen by
Karl Petrick
Western New England University

  1. Stagnation Traps By Gianluca Benigno; Luca Fornaro
  2. Wage- versus profit-led growth in the context of international interactions and public spending: The political aspects of wage-led recovery By Özlem Onaran
  3. The origins, development, and fate of Clower's stock-flow general equilibrium program By Plassard, Romain
  4. "Reassemble the Basis of Marxian Economics" (in Japanese) By Michiaki Obata
  5. The Paris Climate Agreement: Is It Sufficient to Limit Climate Change? By Hanna Brauers; Philipp M. Richter
  6. Two Global Challenges, One Solution: International Cooperation to Combat Climate Change and Tropical Deforestation - Working Paper 388 By Antonio G.M. La Viña and Alaya de Leon
  7. The Banking Regulatory Bubble and How to Get out of It By Giovanni Ferri; Doris Neuberger

  1. By: Gianluca Benigno; Luca Fornaro
    Abstract: We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the interest rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms' investment in innovation. Policies aiming at restoring growth can successfully lead the economy out of a stagnation trap, thus rationalizing the notion of job creating growth.
    Keywords: secular stagnation, liquidity traps, growth traps, endogenous growth, multiple equilibria
    JEL: E32 E43 E52 O42
    Date: 2016–02
  2. By: Özlem Onaran (University of Greenwich)
    Abstract: This paper presents the empirical evidence about the impact of the simultaneous race to the bottom in labour’s share on growth after taking global interactions into account based on the Post-Kaleckian theoretical framework developed by Bhaduri and Marglin (1990). The world economy and large economic areas are likely to be wage-led; and parameter shifts in different periods are unlikely to make a difference in this finding. The effects that can come from a wage-led recovery on growth and hence employment are positive, however they are also modest in magnitude. We then present an alternative scenario based on a policy mix of wage increases and public investment. A coordinated mix of policies in the G20 targeted to increase the share of wages in GDP by 1%-5% in the next 5 years and to raise public investment in social and physical infrastructure by 1% of GDP in each country can create up to 5.84% more growth in G20 countries. The final section addresses the political aspects and barriers to a wage-led recovery.
    Keywords: wage share, wage-led growth, globalization, public investment
    JEL: E12 E22 E25
    Date: 2016–02
  3. By: Plassard, Romain
    Abstract: Before becoming the hallmark of macroeconomics à la Wynne Godley, the ‘stock-flow’ analysis was already developed in microeconomics and general equilibrium theory. Basically, the goal was to study the formation of economic plans and the determination of market prices when individuals were supposed to consume, produce, and hold commodities. It is acknowledged that Robert W. Clower was a central figure in this theoretical context. Yet, for both his contemporaries and for historians, his contributions remained essentially technical. No attention was paid to the theoretical project underlying the statics and dynamics analyses of his ‘stock-flow’ price theory. My paper aims to fill this gap. In light of his doctoral dissertation, I show that the elaboration of ‘stock-flow’ market models was part of a project aiming at offering sound microfoundations to a Keynesian business cycle model. I analyze the origins of this microfoundation program, trace its development, and discuss its fate.
    Keywords: microfoundations of macroeconomics, trade cycle, stock-flow analysis, Bushaw and Clower.
    JEL: B21 B22 D40 E12 E3 E32
    Date: 2015–10
  4. By: Michiaki Obata (Faculty of Economics, University of Tokyo)
    Abstract: The purpose of this thesis is to specify the feature of the basic theory of Marxian economics and to show clearly the difference with the microeconomics and macroeconomics. Minimum agreements between Marxian are I. The market where money exist, II. the objective theory of value, III. the theory of surplus and IV. the labor market in which unemployed laborer exists. Item II and item III, which are basically common between Marxian and the classic school of economics represented by David Ricardo, distinguishes them from micro and macroeconomics. Both item I and item IV, which stem from the idea of commodity value, show the difference between Marxian and the classical school.
  5. By: Hanna Brauers; Philipp M. Richter
    Abstract: “The Paris Agreement is a monumental triumph for people and our planet” (UN News Centre, 2015). Statements, like this one from UN Secretary-General Ban Ki-Moon, represent the global excitement shortly after the acceptance of the Paris Agreement and describe the outcome of the COP21 in December 2015 primarily as ‘historical’. Twenty years after the UN’s first COP (Conference of the Parties), the international community reached “the first universal agreement in the history of climate negotiations” (French Government, 2015).Euphoria about the diplomatic success gave way to scepticism if the deal will actually have real political power to initiate ambitious climate policy worldwide that can prevent dangerous levels of climate change. It will be the next years and decades that show whether the Paris Agreement can create the so far missing global ambition to limit anthropogenic climate change and its capability to reduce risks and vulnerability to the impacts of an already changed climate.In this DIW Roundup we discuss the most important achievements of the negotiations in Paris, and show necessary steps, so that the convention will lead to the historic actions it is meant to create. Doing so, we complement a previous DIW Roundup (No. 82; Richter and Brauers, 2015), where we evaluated expectations prior to the Paris climate talks in December 2015.
    Date: 2016
  6. By: Antonio G.M. La Viña and Alaya de Leon
    Abstract: This paper provides an analysis of the international political dynamics around the reduction of tropical deforestation and forest degradation as a climate mitigation strategy, emphasizing the necessity of an enabling environment and sustainable financing to support the scaling up of these efforts globally. After describing the evolution from the 1990s of international cooperation to combat tropical deforestation, the paper focuses principally on the United Nations Framework Convention on Climate Change (UNFCCC), and how it provided an impetus for a renewed effort on this issue. The paper describes the complex process through which the climate and tropical forest agenda got inserted into UNFCCC processes, from its marginal role in the Clean Development Mechanism (CDM) created by the Kyoto Protocol to the emergence of REDD+ (Reducing Emissions from Deforestation and Forest Degradation and the Role of Conservation, Sustainable Management of Forests and Enhancement of Forest Carbon Stocks) as the forum where decisions have been made on climate and tropical forests. The paper dissects the issues that have dominated the REDD+ negotiations, identifies and characterizes the actors and constituencies that have been influential in the process, analyzes lessons learned from the successes of this UNFCCC agenda, and suggests recommendations to move the REDD+ and overall tropical forests and climate agenda forward. The paper concludes with an anticipation of what to expect in the future, in the light especially of what could possibly be a new climate change agreement in 2015.
    Keywords: Climate change, Forests, REDD+.
    JEL: Q23 Q54 F53
    Date: 2014–12
  7. By: Giovanni Ferri (LUMSA University); Doris Neuberger (University of Rostock)
    Abstract: We claim that we currently live in a banking regulatory bubble. We review how: i) banking intermediation theory hinges on dealing with borrower-lender asymmetry of information; ii) instead, the presence of complete information is the keystone of the finance theory. Next, we document how finance theory prevailed over banking intermediation theory in shaping banking regulation: This appalling contradiction is the true culprit behind lower credit standards, mounting systemic risk in banking, and macroeconomic debt overhang. Consequently, we discuss actions that, by restoring the consistency of banking regulation with the theory of banking intermediation, would make banking sounder.
    Keywords: Asymmetric Information; Relationship Lending vs. Transactional Lending; Efficient Markets Hypothesis; Banking Regulation Inconsistencies; Basel II.
    JEL: G01 G14 G21 G28
    Date: 2014–05

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