nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒05‒07
nine papers chosen by
Karl Petrick
Western New England University

  1. Monetary policy and the punch bowl - The case for quantitative policy and wage growth targeting. By Thomas I. Palley
  2. Stability of zero-growth economics analysed with a Minskyan model By Adam B. Barrett
  3. Finance, Growth And Fragility By Panicos O. Demetriades; Peter L. Rousseau; Johan Rewilak
  4. Сакрален ли е неокласическият икономически модел? (Опорни точки в защитата му) By Tchipev, Plamen D
  5. Is planet Earth as a whole likely to be wage-led? By Arslan Razmi
  6. Is the Gender Pay Gap in the US Just the Result of Gender Segregation at Work? By Meara, Katie; Pastore, Francesco; Webster, Allan
  7. Institutions & Well-being By Bennett, Daniel; Nikolaev, Boris; Aidt, Toke
  8. EMU and sustainable integration By Iain Begg; Annette Bongardt; Kalypso Nicolaïdis; Francisco Torres
  9. A Critical Review of the US State Department’s 2015 Progress Report on Haiti By Alexander Main; Jasmine Huggins; Jake Johnston; Charissa Zehr; Jessica Hsu; Alan Yarborough

  1. By: Thomas I. Palley
    Abstract: Federal Reserve Chairman William McChesney Martin famously declared that the Federal Reserve "is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up." This paper uses the punch bowl metaphor to analyze how the Federal Reserve can improve monetary policy so as to deliver shared prosperity with greater financial stability. The problem is the party starts earlier on Wall Street than Main Street, so the Fed may remove the punchbowl before the party reaches Main Street. Ensuring Main Street attends the party requires a new recipe for the punch, new serving rules, and a new punch master. Additionally, there is a deeper problem that current neoliberal growth model has the economy addicted to monetary punch. Resolving that requires a cure that goes beyond the punch bowl.
    Date: 2017
  2. By: Adam B. Barrett
    Abstract: As humanity is becoming increasingly confronted by Earth's finite biophysical limits, there is increasing interest in questions about the stability and equitability of a zero-growth capitalist economy, most notably: if one maintains a positive interest rate for loans, can a zero-growth economy be stable? This question has been explored on a few different macroeconomic models, and both `yes' and `no' answers have been obtained. However, economies can become unstable whether or not there is ongoing underlying growth in productivity with which to sustain growth in output. Here we attempt, for the first time, to assess via a model the relative stability of growth versus no-growth scenarios. The model employed draws from Keen's model of the Minsky financial instability hypothesis. The analysis focuses on dynamics as opposed to equilibrium, and scenarios of growth and no-growth of output (GDP) are obtained by tweaking a productivity growth input parameter. We confirm that, with or without growth, there can be both stable and unstable scenarios. To maintain stability, firms must not change their debt levels or target debt levels too quickly. Further, according to the model, the wages share is higher for zero-growth scenarios, although there are more frequent substantial drops in employment.
    Date: 2017–04
  3. By: Panicos O. Demetriades; Peter L. Rousseau; Johan Rewilak
    Abstract: We utilise a new international database of financial fragility indicators for 124 countries from 1998 to 2012 to investigate the effects of fragility on the finance-growth nexus. Cross-country growth regressions suggest that both financial fragility and private credit have negative effects on GDP growth over this period. The results are robust to controlling for systemic banking crises, confirming that financial fragility has additional negative effects on growth, even if a banking crisis is avoided. We also present results using interactions which suggest that (a) a large volume of impaired loans can amplify the negative effects of private credit on growth and (b) a sufficiently high z-score can eradicate the negative effects of private credit on growth.
    Date: 2017–05
  4. By: Tchipev, Plamen D
    Abstract: Paradoxically, in the course of the 2008 crisis, the defense of the neoclassical principles of the mainstream economics got ahead of the antici-pated Keynesian attack ignoring completely the criticism coming from the side of the heterodox economics. But the latter is perhaps most active today. The text presented here tries to identify through the heterodox prism, the ‘sacred’ points - those critical axioms which are so rigorously defended by the mainstream economics.
    Keywords: criticism to neoclassical economics; heterodox economics; 2008 crisis.
    JEL: B4
    Date: 2016
  5. By: Arslan Razmi (Department of Economics, University of Massachusetts Amherst)
    Abstract: Evidence regarding the relationship between distribution, demand, and growth in the short run has been mixed. Open economy models that create the possibility of beggar-thy-neighbor growth offer one theoretical explanation for why this may be expected. Several authors have argued recently, however, that even if demand and growth are profit-led in many individual countries, the global economy is likely to be wage-led since the planet as a whole runs balanced trade. This paper finds that this argument, although intuitively appealing, does not hold up to careful examination. Although the world economy as a whole is a closed system, it is not isomorphic to a closed economy, thanks to repercussion effects, relative price movements, and cross-country heterogeneity. The effects of global redistribution depend on the nature of its constituent economies.
    Keywords: Demand regime, income distribution, wage-led growth, neo-Kaleckian open economy models.
    JEL: F43 O41 O11 E12
    Date: 2017
  6. By: Meara, Katie (Bournemouth University); Pastore, Francesco (University of Naples II); Webster, Allan (Bournemouth University)
    Abstract: This study examines the gender wage gap between male and female workers in the US using a cross-section from the Current Population Survey (CPS) It shows that the extent of gender segregation by both industry and occupation is significantly greater than previously supposed. For the wage gap this creates problems of sample selection bias, of non-comparability between male and female employment. To address these problems the study uses a matching approach, which we also extend to a more recent methodological version with a yet stronger statistical foundation – Inverse Probability Weighted Regression Adjustment (IPWRA) – not previously used in related studies. Despite this, doubts remain about even these well founded and appropriate techniques in the presence of such strong gender segregation. To secure even greater precision we repeat the matching analysis for a small number of industries and occupations, each carefully selected for employing similar numbers of men and women. This is an approach that has not previously been explored in the relevant literature. The findings for the full sample are replicated at the level of industry and occupation, where comparability is more reliable. The study supports the view of the existing literature that the gender wage gap varies by factors such as age and parenthood. But it also finds that, even when these and other important "control" variables such as part-time working, industry and occupation are taken into account, a statistically significant gender wage gap remains.
    Keywords: gender pay gap, segregation, sample selection bias, propensity score matching IPWRA, USA
    JEL: C31 J16 J31
    Date: 2017–03
  7. By: Bennett, Daniel; Nikolaev, Boris; Aidt, Toke
    Abstract: It is by now well-established in the development economics literature that institutions play a vital role in shaping social, economic, and political incentives, reducing transaction costs and uncertainty, and promoting long-run economic growth. Following recent developments on the measurement of socio-economic progress, which emphasize the importance of many non-economic dimensions of quality of life, the goal of this special issue is to encourage new socio-economic research on the relationship between institutions and well-being in this broader sense. Here, we provide a brief overview of the existing literature on institutions and well-being and then summarize the papers in this special issue according to three unifying themes (1) economic freedom studies; (2) institutions and long-run growth, and (3) well-being and institutions in transition economies. We conclude by discussing some challenges for future research.
    Keywords: institutions, well-being, development
    JEL: O10 O17 P5
    Date: 2016–12
  8. By: Iain Begg; Annette Bongardt; Kalypso Nicolaïdis; Francisco Torres
    Abstract: This paper considers what will be required to make Economic and Monetary Union (EMU) sustainable following the successive crises of recent years. It starts by laying out the policy benchmark, namely the successive ‘President Reports’ produced by EU institutions. It then suggests three dimensions of sustainable integration relevant to EMU, namely the pursuit of sustainable growth, the need to take into account what we call ‘varieties of modernisation’ and the ‘ownership’ of democratically sustainable reforms. It then evaluates the recasting of EMU governance against the benchmark of sustainable integration
    Keywords: EMU; sustainable integration; sustainable growth; varieties of modernisation; ownership of reforms
    JEL: N0
    Date: 2015–10
  9. By: Alexander Main; Jasmine Huggins; Jake Johnston; Charissa Zehr; Jessica Hsu; Alan Yarborough
    Abstract: This review, published jointly by the Center for Economic and Policy Research and the Haiti Advocacy Working Group, looks at the US State Department’s annual reports on US assistance to Haiti mandated under the 2014 Assessing Progress in Haiti Act. The review analyzes the various components of the reports and identifies significant omissions and deficiencies, including incomplete data, a failure to link projects and outcomes, and a failure to adequately identify mistakes and lessons learned. In addition, the review shares feedback from Haitian civil society groups and makes recommendations on how the US Agency for International Development and the State Department can improve future progress reports.
    JEL: F F3 F35 F5 I I3
    Date: 2016–12

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