nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒11‒27
nine papers chosen by
Karl Petrick
Western New England University

  1. The dynamics of leverage in a Minskyan model with heterogenous firms By Corrado Di Guilmi; Laura Carvalho
  2. Inequality, financialisation and economic decline By Pasquale Tridico; Riccardo Pariboni
  3. Is Cash Dead? Using Economic Concepts To Motivate Learning and Economic Thinking By Philip Gunby; Stephen Hickson
  4. Asian Giants' Fossil Fuel Dependence and the Challenge of Low Carbon Growth: Contrasting Performance of Clean Energy Development, Trade and Investment By Jain, Varinder
  5. The Rise of a Mainstream in Economics By Michel De Vroey; Luca Pensieroso
  6. The Demographic Deficit By Espen Henriksen; Thomas Cooley
  7. The Theory of Credit and Macro-economic Stability By Joseph E. Stiglitz
  8. The Costs and Benefits of Migration into the European Union: Debunking Contemporary Myths with Facts By Asongu, Simplice; Leke, Ivo
  9. Bugs, tariffs and colonies: the political economy of the wine trade 1860-1970 By Giulia Meloni; Jo Swinnen

  1. By: Corrado Di Guilmi (Economics Discipline Group, University of Technology, Sydney); Laura Carvalho (Department of Economics, University of Sao Paulo, Brazil)
    Abstract: This paper introduces heterogeneous microeconomic behavior into a demand-driven macroeconomic model in order to study the joint dynamics of leverage and capital accumulation. By identifying the links between firm level variables and aggregate quantities, the paper contributes toward a reformulation of the Minskyan formal analysis that explicitly considers the role of microeconomic factors in generating macroeconomic instability. The aggregation of heterogeneous agents is not only performed numerically, as in traditional agent-based models, but also by means of an innovative analytical methodology, originally developed in statistical mechanics and recently imported into macroeconomics. The distinctive feature is in that the joint analysis of the numerical and analytical solutions of the model sheds light on the effects of financial fragility at the firm level on the dynamics of the macroeconomy. In particular, the analysis of steady-state and stability properties of the system provide additional insights on the role of behavioral and size heterogeneity of firms for the stocks of aggregate debt and capital.
    Keywords: financial fragility; aggregate demand; agent-based model; master equation
    JEL: E16 E32 G01
    Date: 2015–07–31
  2. By: Pasquale Tridico; Riccardo Pariboni
    Abstract: The objective of this paper is to argue that the labour productivity decline experienced in recent years by several advanced countries can be explained, following a Kaldorian-Classical approach, by a weak GDP performance and by a decline in the wage share. Moreover, drawing inspiration from recent Post- Keynesian literature, we identify the ongoing worsening in income equality and the increase in the degree of financialisation as other major explanatory factors of sluggish productivity. The paper will provide a brief literature review concerning non-mainstream attempts to endogenise labour productivity. We will then discuss how labour flexibility and shareholder value orientation, one of the main aspects of financialisation, can negatively affect equality and labour productivity. Finally, we will propose and test an extended version of Sylos Labini’s productivity equation, where productivity is claimed to depend positively on GDP rate of growth and the wage share, and negatively on income inequality and financialisation.
    Keywords: Labour productivity, Inequality, Financialisation.
    JEL: E02 E12 E24 E44
    Date: 2016–11
  3. By: Philip Gunby (University of Canterbury); Stephen Hickson (University of Canterbury)
    Abstract: Economics is at its best when used to shed light on questions of interest to students. Even better if the answers are at odds with commonly held but incorrect views. The velocity of circulation is probably the most neglected concept in macroeconomics classes but it can be used to open up a discussion on the behaviour of people and why demand for money may rise or fall. It can be used to address the question "Is Cash Dead?" Despite the rise in the number of ways that people can pay without using cash, there seems to be no drop in the amount of cash people actually wish to hold. This is a puzzle and a good opportunity to get students thinking about why this might be.
    Keywords: Principles of Economics, Velocity of Circulation, Cashless Society
    JEL: A22
    Date: 2016–11–01
  4. By: Jain, Varinder
    Abstract: With sluggish growth in alternate technologies, economic growth across the world has remained largely fuelled by hydro-carbons whose burning has contributed to the menace of global warming. In such a situation, this study focusing on the economies of China, India and Japan – the three Asian Giants, aims at not only ascertaining their fossil fuel dependence but it also addresses its environmental implications. Moreover, it contrasts their attainments in clean energy development. An analysis of trade in climate smart technologies reflects the nature of mutual cooperation among these giants. Similarly, an analysis of recent trends in investment financing corroborates their pursuit of low carbon growth agenda which is a major cause of concern in most of the international climate change negotiations.
    Keywords: Fossil Fuels, Oil, Coal, Natural Gas, Clean Energy, Solar Energy, Wind Energy, Renewable Energy Investment, Climate Smart Technologies Trade, Asian Giants, India, China, Japan
    JEL: F15 Q20 Q41 Q42
    Date: 2016–11–17
  5. By: Michel De Vroey (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Luca Pensieroso (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Our paper contends that the existence of mainstream economics ought to be understood as a particular case of the now widespread certification phenomenon, which defines good practices on the grounds of a compliance with well-defined standards. Basing our analysis on Leijonhufvud’s vision of the construction of economic theory, we document the fragmentation process which economics has undergone from the marginalist revolution to the present. Studying the evolution of five sub-branches of economics, we show how at the end of the 1970s loose standards for good research practices were replaced by narrower ones in each of them. We claim that this change and the emergence of a mainstream were two faces of the same process.
    Keywords: mainstream, decision tree, neoclassical approach
    JEL: A10 A20 B20
    Date: 2016–11–18
  6. By: Espen Henriksen (University of California, Davis); Thomas Cooley (New York University)
    Abstract: There has been a slowdown in growth in the world's largest economies. One argument is that this slowdown represents a permanent shift in potential output because the innovations available to us in the future will not lead to the productivity growth that we have experienced in the recent past. An alternative argument, the Secular Stagnation hypothesis - is that the slower growth reflects a shortfall of aggregate demand at current interest rates. In this view the real natural rate of interest has declined and the real interest rate required to equate savings and investment at full employment is negative. One important issue that both explanations must confront is accounting for the differences in slowdown across the major developed economies. Differences in TFP growth turn out to play a minor role. The largest contributions to the differences in GDP growth are demographic factors: population growth, labor market participation, average number of hours worked, and capital intensity. Accounting for the historical differences gives a laboratory to project future growth rates given population forecasts.
    Date: 2016
  7. By: Joseph E. Stiglitz
    Abstract: In the aftermath of the Great Recession, there is a growing consensus, even among central bank officials, concerning the limitations of monetary policy. This paper provides an explanation for the ineffectiveness of monetary policy, and in doing so provides a new framework for thinking about monetary policy and macro-economic activity. What matters is not so much the money supply or the T-bill interest rate, but the availability of credit, and the terms at which credit is made available. The latter variables may not move in tandem with the former. In particular, the spread between the T bill rate and the lending rate may increase, so even as the T bill rate decreases, the lending rate increases. An increase in credit availability may not lead to more spending on produced goods, but increased prices for land or other fixed assets; it can go to increased margins associated with increases in speculative activity; or it may go to spending abroad rather than at home. The paper explains the inadequacy of theories based on the zero low bound, and argues that the ineffectiveness of monetary policy is more related to the multiple alternative uses—beyond the purchase of domestically produced goods—of additional liquidity and to its adverse distributional consequences. The paper shows that while monetary policy is less effective than has been widely presumed, it is also more distortionary, identifying several distinct distortions.
    JEL: E42 E44 E51 G01 G20
    Date: 2016–11
  8. By: Asongu, Simplice; Leke, Ivo
    Abstract: The purpose of this study is to dispel some myths associated with migrants in order to improve socio-economic appraisal of the consequences of the recent surge of migrants into Europe. We argue that: (i) the concern about loss of Christian cultural values is lacking in substance because compared to a relatively near historical epoch or era, very few European citizens do go to Church in contemporary Europe; (ii) the threat to European liberal institutions is falsifiable and statistically fragile because it is not substantiated with significant evidence; (iii) the insignificant proportion of the Moslem population that is aligned with Islamic fundamentalism invalidates the hypothesis on importation of radical Islamic fundamentalism and (iv) the concern about social security burden is relevant only in the short-term because of Europe’s ageing population.
    Keywords: Migration; the European Union; Development
    JEL: F20 J61 J83 K31 O15
    Date: 2016–11
  9. By: Giulia Meloni; Jo Swinnen
    Abstract: The 1860–1970 period is a particularly interesting period to study wine trade because of dramatic changes in the wine markets and trade over the course of a century. The dramatic changes in trade flows were caused by both “nature” and “men”. Mediterranean wine trade represented around 90% of global wine trade and France was the world’s leading exporter. The arrival of Phylloxera devastated French vineyards and stimulated Spanish and Italian wine exports. When French wine production recovered, French winegrowers pressured their government to intervene, resulting in high tariffs on Spanish and Italian wines and Greek raisins. The protectionist trade regime contributed to the bankruptcy of Greece and to the substitution of wine trade from Spain and Italy to France’s North African colonies. When Algeria, Morocco and Tunisia became independent, France imposed high wine tariffs, effectively killing their wine exports. The decline of the wine industry in North Africa coincided with the trade and policy integration of the South European wine exporters in the EEC—the predecessor of the EU.
    Date: 2016–10

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