nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒02‒26
fifteen papers chosen by
Karl Petrick
Western New England University

  1. "Full Employment: Are We There Yet?" By Flavia Dantas; L. Randall Wray
  2. "Brazil Still in Troubled Waters" By Fernando J. Cardim de Carvalho
  3. Poverty, employment and inequality in the SDGs: Heterodox discourse, orthodox policies? By Luebker, M.
  4. The Australian Macro Database: An online resource for macroeconomic research in Australia By Timur Behlul; Anastasios Panagiotelis; George Athanasopoulos; Rob J Hyndman; Farshid Vahid
  5. The Post-Truth Era in Government Evaluation of Major Projects and Policies By Leo Dobes
  6. Keynes and the Dollar in 1933 By Sebastian Edwards
  7. The theoretical weaknesses of the expansionary austerity doctrine By Botta, Alberto
  8. Is the International Tax System Fit for Purpose, Especially for Developing Countries? By Picciotto, Sol
  9. A Risk Economic Approach to Nuclear Power Generation:From Daniel Bernoulli to Keynes and Knight By Yasuhiro Sakai
  10. ¿Se pueden aplicar las ideas Keynesianas al largo plazo? Unas reflexiones teóricas y un modelo ilustrativo By Marco Missaglia
  11. Horizons 2030: Equality at the centre of sustainable development By -
  12. Undergraduate Econometrics Instruction: Through Our Classes, Darkly By Joshua D. Angrist; Jörn-Steffen Pischke
  13. Improving International Tax Dispute Settlement By Picciotto, Sol
  14. The Anatomy of Financial Vulnerabilities and Crises By Seung Jung Lee; Kelly E. Posenau; Viktors Stebunovs
  15. Austerity in the Aftermath of the Great Recession By Christopher L. House; Christian Proebsting; Linda L. Tesar

  1. By: Flavia Dantas; L. Randall Wray
    Abstract: Flavia Dantas and L. Randall Wray argue that the emerging conventional wisdom--that the US economy has reached full employment--is flawed. The unemployment rate is not providing an accurate picture of the health of the labor market, and the common narrative attributing shrinking labor force engagement to aging demographics is overstated. Instead, falling prime-age participation rates are the symptom of a structural inadequacy of aggregate demand--a problem of insufficient job creation and stagnant incomes that conventional public policy remedies have been unable to address. The solution to our long-running secular stagnation requires targeted, direct job creation for those at the bottom of the income scale.
    Date: 2017–02
  2. By: Fernando J. Cardim de Carvalho
    Abstract: Since inheriting the Brazilian presidency five months ago, the new Temer administration has successfully ratified a constitutional amendment imposing a radical, two-decades-long public spending freeze, purportedly aimed at sparking an increase in business confidence and investment. In this policy brief, Fernando Cardim de Carvalho explains why this fiscal strategy is based not only on a flawed conception of the drivers of private-sector confidence and investment but also on a mistaken view of the roots of the current Brazilian economic crisis. The hoped-for “expansionary fiscal consolidation†is not likely to be achieved.
    Date: 2017–02
  3. By: Luebker, M.
    Abstract: The Sustainable Development Goals (SDGs) put much emphasis on the employment and inequality, a noteworthy shift from the Millennium Development Goals (MDGs) and their focus on poverty eradication. To achieve ‘Sustained, inclusive and sustainable economic growth’, SDG Goal 8 contains targets on productivity-enhancing policies, employment and decent work, and makes reference to three out of the four fundamental labour rights. While these are necessary ingredients for a sustained increase in living standards and important elements of heterodox accounts of development, they are not sufficient conditions to create equitable growth. Drawing on examples from Asia, the paper makes this argument by addressing three orthodox conjectures: that workers benefit from productivity growth through higher wages; that factor shares in national income are roughly constant; and that policy interventions such as minimum wages are bound to fail. The paper concludes with two policy implications: (1) Countries need to adopt fiscal, wage and social protection policies that reduce inequalities of outcome and achieve faster income growth for the poorest – elements which can be found in Goal 10. (2) Effective labour markets governance needs to include the right to freedom of association and collective bargaining, the only fundamental labour right not explicitly mentioned in the SDGs.
    Keywords: SDGs, poverty, productivity, labour market institutions, income inequality, functional distribution of incomes
    JEL: D31 D33 I30 J31 J83
    Date: 2017–02–16
  4. By: Timur Behlul; Anastasios Panagiotelis; George Athanasopoulos; Rob J Hyndman; Farshid Vahid
    Abstract: A website that encourages and facilitates the use of quantitative, publicly available Australian macroeconomic data is introduced. The Australian Macro Database hosted at provides a user friendly front end for searching among over 40000 economic variables, sourced from the Australian Bureau of Statistics and the Reserve Bank of Australia. The search box, tags and categories used to facilitate data retrieval, are described in detail. Known issues with the website and future plans are discussed in the conclusion.
    Keywords: Economic time series, Macroeconomic data, Australian Bureau of Statistics, Reserve Bank of Australia, FRED
    JEL: C55 C82
    Date: 2017–02
  5. By: Leo Dobes
    Abstract: Australian experience reveals an increasingly post-truth approach to economic evaluation, with governments ignoring or avoiding professional expertise when promoting their favoured projects and policies. Lack of formal guidelines for economic evaluation, such as those promulgated by Congress and successive American presidents, are a partial explanation. A concomitant hollowing-out of public service expertise in economic analysis has also occurred. More importantly, public sector agencies have even lost much of their capability to understand and assess evaluations carried out on their behalf by commercial consultants. An effective antidote to this deskilling would be the production and publication of analyses of major government policy and project proposals, as well as the development of a standardised analytical framework, reinforced with training for public servants.
    Keywords: post-truth, cost-benefit analysis, evaluation, iconic, nation-building
    JEL: D61 H43
    Date: 2017–02
  6. By: Sebastian Edwards
    Abstract: On December 1933, John Maynard Keyes published an open letter to President Roosevelt, where he wrote: “The recent gyrations of the dollar have looked to me more like a gold standard on the booze than the ideal managed currency of my dreams.” In this paper I use high frequency data to investigate whether the gyrations of the dollar were unusually high throughout this period. My results show that although volatility was pronounced, it was not higher than during October 1931- July 1933. I analyze Keynes writings on the international monetary system in an effort to understand what he meant in his letter. I compare Keynes’s “The means to prosperity” with James P. Warburg’s plan for a “modified international standard.”
    JEL: B22 B26 B3 E31 E5 F31 N22
    Date: 2017–02
  7. By: Botta, Alberto
    Abstract: In this paper, we provide a critical analysis of the theory of the expansionary austerity. We take the hotly debated contribution by Carmen Reinhart and Kenneth Rogoff on the supposedly negative relationship between public debt and economic growth (when the debt-to-GDP ratio overcomes the 90 percent threshold) as the starting point of our analysis. We then move to analyze those contributions that more directly point to the possible expansionary outcomes of tough fiscal retrenchments. We eventually criticize the main conclusions of the expansionary austerity theory by presenting a simple short-run theoretical model. We show that fiscal consolidation might have expansionary outcomes only under extreme, very specific and uncertain circumstances. Expansionary austerity would hardly take place in the context of monetarily sovereign economies, or in presence of an accommodative monetary policy like that implemented by the ECB since late 2011, or in economic systems that are poorly integrated to international goods markets.
    Keywords: fiscal policy; expansionary austerity theory; post-Keynesian macro models;
    Date: 2016–01
  8. By: Picciotto, Sol
    Abstract: This ICTD Research in Brief is a two-page summary of ICTD Working Paper 13, by Sol Picciotto. The brief is aimed at policy makers, tax administrators, fellow researchers and anyone else who is big on interest and short on time. We hope you enjoy it. This paper traces the historical development of the international tax system, and shows why it is increasingly unfit for purpose, especially in view of the growing dominance of transnational corporations (TNCs). It makes proposals for an evolutionary shift towards a unitary approach for taxing TNCs.
    Keywords: Development Policy, Economic Development, Governance,
    Date: 2016
  9. By: Yasuhiro Sakai (Faculty of Economics, Shiga University)
    Abstract: This paper aims to discuss the problem of nuclear power generation from the viewpoint of the economics of risk and uncertainty. Although we have experienced the two major nuclear disasters, Chernobyl and Fukushima, in recent times, it is quite unfortunate that risk-economic studies in nuclear power generation have been extremely rare so far. This may show intentional neglect in the academic circle. The purpose of this paper is to duly mend such a regrettable tendency. Before 11 March 2011, there were many people who more or less believed in the myth of absolute safety. The Great East Japan Earthquake, however, has completely changed their concept of risk for nuclear power generation, thus requiring the need to take a new risk-economic approach to nuclear energy. As saying goes, we can learn new lessons in old teachings: we have to reexamine the economics of J.M. Keynes and Frank Knight. There are many possibilities for future research.
    Keywords: Risk, uncertainty, nuclear power generation, Keynes, Knight
  10. By: Marco Missaglia
    Abstract: El modelo que se construye en este artículo quiere mostrar que la más importante idea Keynesiana, el principio de la demanda efectiva, no se aplica solamente a un corto plazo en el que unos precios son fijos o rígidos. También se aplica a un largo plazo en el que los precios son perfectamente flexibles y vacían el mercado, las firmas maximizan sus ganancias y la distribución funcional del ingreso depende de las productividades marginales. También se muestra que la naturaleza Keynesiana de un modelo no depende de sus resultados – en unos casos bajar los salarios es una buena idea y en otros no lo es; en unos casos la paradoja del ahorro vale en el largo plazo y en otros no vale – sino del hecho de incorporar (o no incorporar) la noción de demanda autónoma. Para terminar, se le da un sustento a la idea de que la forma en la que se trata el asunto de los salarios monetarios (y su flexibilidad) en la Teoría General no se puede aplicar al mundo “financiarizado” en el que estamos. ****** This paper presents a model intended to show that the most important Keynesian idea, the principle of effective demand, cannot be only applied to short terms, in which some prices are fixed or sticky; but also to long terms where prices are perfectly flexible and empty the market, firms increase their profits, and where the functional income distribution depends on marginal productivities. Moreover, we will show that the Keynesian nature of a model does not depend on its results, in some cases lowering wages is a good policy and in others it is not. In some cases, the paradox of thrift stands out in the long run and in some others it does not; instead, this nature depends on incorporating (or not) the notion of autonomous demand. To conclude, we will support the idea stating that the way in which monetary wages (and flexibility) are addressed in the General Theory is not applicable to the financialized world, where we live.
    Keywords: Economía keynesiana, enseñanza de la economía, flexibilidad salarial, Keynesian economics, Teaching of Economics, Wage flexibility.
    JEL: A20 B00 B20 B30 E12
    Date: 2015–09–01
  11. By: -
    Abstract: The world is living a change of era. The 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals represent the international community’s response to the economic, distributive and environmental imbalances built up under the prevailing development pattern. This document, presented by the Economic Commission for Latin America and the Caribbean (ECLAC) to its member States at its thirty-sixth session, provides an analytical complement to the 2030 Agenda from a structuralist perspective and from the point of view of the Latin American and Caribbean countries. The proposals made here stem from the need to achieve progressive structural change in order to incorporate more knowledge into production, ensure social inclusion and combat the negative impacts of climate change. The reflections and proposals for advancing towards a new development pattern are geared to achieving equality and environmental sustainability. In these proposals, the creation of global and regional public goods and the corresponding domestic policies form the core for expanding the structuralist tradition towards a global Keynesianism and a development strategy centred around an environmental big push.
    Date: 2016–07
  12. By: Joshua D. Angrist; Jörn-Steffen Pischke
    Abstract: The past half-century has seen economic research become increasingly empirical, while the nature of empirical economic research has also changed. In the 1960s and 1970s, an empirical economist’s typical mission was to “explain” economic variables like wages or GDP growth. Applied econometrics has since evolved to prioritize the estimation of specific causal effects and empirical policy analysis over general models of outcome determination. Yet econometric instruction remains mostly abstract, focusing on the search for “true models” and technical concerns associated with classical regression assumptions. Questions of research design and causality still take a back seat in the classroom, in spite of having risen to the top of the modern empirical agenda. This essay traces the divergent development of econometric teaching and empirical practice, arguing for a pedagogical paradigm shift.
    JEL: A22
    Date: 2017–02
  13. By: Picciotto, Sol
    Abstract: This ICTD Research in Brief is a two-page summary of ICTD Working Paper 55 by Sol Picciotto. This series is aimed at policy makers, tax administrators, fellow researchers and anyone else who is big on interest and short on time. This paper examines: what are international tax disputes?; the growth of such disputes; causes and solutions; and offers suggestions for a better way forward.
    Keywords: Development Policy, Economic Development, Governance,
    Date: 2016
  14. By: Seung Jung Lee; Kelly E. Posenau; Viktors Stebunovs
    Abstract: We extend the framework used in Aikman, Kiley, Lee, Palumbo, and Warusawitharana (2015) that maps vulnerabilities in the U.S. financial system to a broader set of advanced and emerging economies. Our extension tracks a broader set of vulnerabilities and, therefore, captures signs of different types of crises. The typical anatomy of the evolution of vulnerabilities before and after a financial crisis is as follows. Pressures in asset valuations materialize, and a build-up of imbalances in the external, financial, and nonfinancial sectors follows. A financial crisis is typically followed by a build-up of sovereign debt imbalances as the government tries to deal with the consequences of the crisis. Our early warnings indicators which aggregate these vulnerabilities predict banking crises better than the Credit-to-GDP gap at long horizons. Our indicators also predict the severity of banking crises and the duration of recessions, as they take into account possible spill-over and amplification channels of financial stress to from one to another sector in the economy. Our indicators are of relevance for macroprudential and crisis management, in part, because they perform better than the Credit-to-GDP gap and do not suffer from the gaps econometric flaws.
    Keywords: Credit-to-GDP gap ; Crisis management ; Financial vulnerabilities ; Early warning system ; Financial crises ; Banking crises ; Currency crises ; Macroprudential policy
    JEL: C82 D14 G01 G12 G21 G23 G32 H63
    Date: 2017–02
  15. By: Christopher L. House; Christian Proebsting; Linda L. Tesar
    Abstract: We examine austerity in advanced economies since the Great Recession. Austerity shocks are reductions in government purchases that exceed reduced-form forecasts. Austerity shocks are statistically associated with lower real GDP, lower inflation and higher net exports. We estimate a cross-sectional multiplier of roughly 2. A multi-country DSGE model calibrated to 29 advanced economies generates a multiplier consistent with the data. Counterfactuals suggest that eliminating austerity would have substantially reduced output losses in Europe. Austerity shocks were sufficiently contractionary that debt-to-GDP ratios in some European countries increased as a consequence of endogenous reductions in GDP and tax revenue.
    JEL: E00 E62 F41 F44 F45
    Date: 2017–02

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