nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2016‒12‒04
eight papers chosen by
Karl Petrick
Western New England University

  1. Post-Keynesian macroeconomics since the mid-1990s: Main developments By Hein, Eckhard
  2. Debt and Investment in the Keen Model: a Reappraisal of Modeling Minsky By Adrien Nguyen-Huu; Antonin Pottier
  3. Fiscal Consolidation, Fiscal Policy Transmission, and Current Account Dynamics in South Africa By J. Paul Dunne; Christine S. Makanza
  4. The Legacies of Slavery in and out of Africa By Bertocchi, Graziella
  5. Current Account Dynamics and Monetary Policy Transmission in South Africa By J. Paul Dunne; Christine S. Makanza
  6. The regulation of collective labour relationships : an assessment of the Oliver Williamson's private ordering-public ordering divide By Bernard Baudry; Virgile Chassagnon
  7. “Reviewing Path Dependence Theory in Economics: Micro–Foundations of Endogenous Change Processes” By Gigante, Anna Azzurra
  8. Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective By Daniel L. Bennett; Hugo J. Faria; James D. Gwartney; Daniel R. Morales

  1. By: Hein, Eckhard
    Abstract: In this paper the main developments in post-Keynesian macroeconomics since the mid- 1990s will be reviewed. For this purpose the main differences between heterodox economics in general, including post-Keynesian economics, and orthodox economics will be reiterated and an overview over the strands of post-Keynesian economics, their commonalities and developments since the 1930s will be outlined. This will provide the grounds for touching upon three important areas of development and progress of post- Keynesian macroeconomics since the mid-1990s: first, the integration of distribution issues and distributional conflict into short- and long-run macroeconomics, both in theoretical and in empirical/applied works; second, the integrated analysis of money, finance and macroeconomics and its application to changing institutional and historical circumstances, like the process of financialisation; and third, the development of full-blown macroeconomic models, providing alternatives to the mainstream 'New Consensus Model' (NCM), and allowing to derive a full macroeconomic policy mix as a more convincing alternative to the one implied and proposed by the mainstream NCM, which has desperately failed in the face of the recent crises.
    Keywords: post-Keynesian macroeconomics,heterodox vs. orthodox economics,pluralism in economics,distribution,money,finance,macroeconomics,macroeconomic policies
    JEL: B22 E12
    Date: 2016
  2. By: Adrien Nguyen-Huu (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique); Antonin Pottier (CERNA i3 - Centre d'économie industrielle i3 - MINES ParisTech - École nationale supérieure des mines de Paris - CNRS - Centre National de la Recherche Scientifique - PSL - PSL Research University)
    Abstract: We examine to which extent the Keen model (Keen 1995) is a faithful modelling of Minsky's Finance Instability Hypothesis. We focus on debt, money, and debt-induced crisis. We propose a clear interpretation of the debt: households lend unconsumed income to firms to finance their investments, and money creation is not necessary. We offer a detailed description of the economic collapse and analyse its causes thanks to numerical experiments. The crisis is triggered by profits squeezed by wages and not by debt overhang. We test alternative assumptions on the investors' behaviour to show that behaviour at very low profits is fundamental. We conclude that the Keen crisis has few Minskian flavours.
    Keywords: Keen model, financial crisis, Minsky, endogenous money, investment, debt
    Date: 2016–08–31
  3. By: J. Paul Dunne (School of Economics, University of Cape Town); Christine S. Makanza (School of Economics, University of Cape Town)
    Abstract: The debate on global current account imbalances continues to develop, with growing interest in the macroeconomic instability and widening current account deficits faced by emerging markets. Literature establishes that the current account behaves differently depending on macroeconomic circumstances in countries, so approaches to managing external imbalances should be country tailored. Despite this realisation, there is a lack of investigation into drivers of the current account and the impact of macroeconomic policy on current account dynamics in emerging markets. To address this, the study estimates an SVAR model to analyse the effect of fiscal shocks on the current account. This helps to understand how fiscal shocks shape current account developments, and establishes the usefulness of fiscal consolidation in managing current account deficits by determining whether the twin deficits approach to managing the external balance holds in middle income countries. The study goes further to analyse the channels through which fiscal shocks are transmitted to the current account to understand how current account management policies should be formulated. The study contributes to the literature by providing a case study of South Africa, an emerging economy characterised by large current account deficits, macroeconomic volatility, a well developed financial sector, and a dataset which has not been exploited to understand the external balance. A particularly interesting finding is that expansionary fiscal shocks improve the current account through household savings and public investment , which is a departure from the twin deficits hypothesis.
    Date: 2016
  4. By: Bertocchi, Graziella
    Abstract: The slave trades out of Africa represent one of the most significant forced migration experiences in history. In this paper I illustrate their long-term consequences on contemporaneous socio-economic outcomes, drawing from my own previous work on the topic and from an extensive review of the available literature. I first consider the influence of the slave trade on the"sending" countries in Africa, with attention to their economic, institutional, demographic, and social implications. Next I evaluate the consequences of the slave trade on the "receiving" countries in the Americas. Here I distinguish between the case of Latin America and that of the United States. Overall, I show that the slave trades exert a lasting impact along several contemporaneous socio-economic dimensions and across diverse areas of the world.
    Date: 2016–11
  5. By: J. Paul Dunne (School of Economics, University of Cape Town); Christine S. Makanza (School of Economics, University of Cape Town)
    Abstract: The debate on global current account imbalances has become more pronounced with the change in global monetary conditions following the 2008 financial crisis. Emerging markets are at a greater risk of being affected by these changes as they have weaker macroeconomic fundamentals and are less insulated against external shocks. This implies they are at a greater risk of adverse effects of normalisation of monetary policy as this may result in an outflow of capital. Despite these risks, there is a lack of investigation into the consequences of monetary policy for current account deficits in emerging economies. This study covers this gap by estimating SVAR models to analyse the effect of monetary policy on current account dynamics in South Africa. South Africa is used as an attractive emerging market case study because of the large current account deficit and dataset that has so far not been exploited to understand the external balance. The study analyses the effect of foreign and domestic monetary shocks on current account developments so as to determine whether changing global monetary policy warrants any intervention of the current account in emerging markets. The study goes further to analyse the channels through which monetary shocks are transmitted to the current account so as to determine how the savings investment gap is affected by monetary policy. Our main contribution is in providing an understanding of the relationship between the current account and monetary policy in emerging markets, and uncovering the effects of global monetary policy on emerging market current accounts. Our analysis shows that the current account is affected by global monetary shocks, with higher foreign interest rates resulting in a lower current account deficit, suggesting that the normalisation of US monetary policy could result in a sharp current account reversal.
    Date: 2016
  6. By: Bernard Baudry (TRIANGLE - Triangle : action, discours, pensée politique et économique - CNRS - Centre National de la Recherche Scientifique - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - Institut d'Études Politiques [IEP] - Lyon - ENS Lyon - École normale supérieure - Lyon); Virgile Chassagnon (UGA - Université Grenoble Alpes)
    Abstract: This research article proposes to undertake a critical review of Oliver Williamson's law and economic theory from the analysis of collective labour relationships in the United States. From a positive point of view, the 2009 Nobel Prize laureate explains that law determines the rules of play (public ordering), and then individuals freely negotiate the rules that constitute the institutions of governance (private ordering). From a normative perspective, Williamson argues that this partition is efficient with respect to the economizing logic of individuals. However, we show that, actually, the American law of labour relationships is based on legal pluralism and that the model of private ordering, which has been less and less used since the 1980s, has strong limitations. In this context, the analysis of the public ordering/private ordering framework that Williamson proposes is of little interest.
    Keywords: Private ordering,public ordering,labour relationships,law and economics,Williamson's transaction cost economics
    Date: 2016–09–01
  7. By: Gigante, Anna Azzurra
    Abstract: This paper proposes a critical review of some of the main applications of path-dependence in economic theory. In particular, it calls attention on those theories clarifying the micro-foundations of path-dependent processes in economics. In the field of innovation, path-dependence shows the endogenous character of technological change, revealing the complex interplay among firm’s structural specificities, irreversibility, creativity, localized learning, externalities, feedbacks and contingent disturbing factors. In cognitive and institutional economics, the path-dependent character of learning processes, shown by cognitive and neurobiological studies, suggests interesting explanations for economic and institutional inefficiency persistence and, in general, for institutional genesis and evolution processes. Micro-foundations of economic path-dependence offer new opportunities for further extending theoretical and empirical economic research. For instance, they could contribute to extend economic self-organization approach, which has focused on the non-linear character of economic dynamic processes and has described economic systems as dissipative and entropic structures. In this sense, path-dependence represents a fertile tool for further clarifying economic and institutional dynamics and a precious opportunity of interdisciplinary research.
    Keywords: path-dependence; endogenous change; non-ergodic process; knowledge production; innovation economics; cognitive economics; institutions; neural structures; self-organization; dissipative systems; entropy law
    JEL: A12 B25 O31
    Date: 2016–11–28
  8. By: Daniel L. Bennett (Florida State University); Hugo J. Faria (University of Miami); James D. Gwartney (Florida State University); Daniel R. Morales (Florida State University)
    Abstract: Existing literature suggests that either colonial settlement conditions or the identity of colonizer were influential in shaping the post-colonial institutional environment, which in turn has impacted long-run economic development, but has treated the two potential identification strategies as substitutes. We argue that the two factors should instead be treated as complementary and develop a novel identification strategy that simultaneously accounts for both settlement conditions and colonizer identity to estimate the potential causal impact of a broad cluster of economic institutions on log real GDP per capita for a sample of former colonies. Using population density in 1500 as a proxy for settlement conditions, we find that the impact of settlement conditions on institutional development is much stronger among former British colonies than colonies of the other major European colonizers. Conditioning on several geographic factors and ethno-linguistic fractionalization, our baseline 2SLS estimates suggest that a standard deviation increase in economic institutions is associated with a three-fourths standard deviations increase in economic development. Our results are robust to a number of additional control variables, country subsample exclusions, and alternative measures of institutions, GDP, and colonizer classifications. We also find evidence that geography exerts both an indirect and direct effect on economic development.
    Keywords: Colonization, Comparative Economic Development, Growth, Geography, Institutions Publication Status: Working Paper
    JEL: F54 O1 O4 P5
    Date: 2016–11–12

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