nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2017‒10‒29
six papers chosen by
Karl Petrick
Western New England University

  1. The Unequal Distribution of Economic Education : A Report on the Race, Ethnicity, and Gender of Economics Majors at US Colleges and Universities By Amanda S. Bayer; David W. Wilcox
  2. An Unintended Consequence of Uncoordinated International Monetary Policy on Central America By Monica Hernandez
  4. Eine keynesianische Analyse der Beschäftigungswirkung einer Arbeitszeitverkürzung By Nägele, Johannes
  5. Stagnant productivity and low unemployment: stuck in a Keynesian equilibrium By Carlin, Wendy; Soskice, David
  6. The Finance-Uncertainty Multiplier By Xiaoji Lin; Nicholas Bloom; Ivan Alfaro

  1. By: Amanda S. Bayer; David W. Wilcox
    Abstract: The distribution of economic education among US college graduates is quite unequal: female and underrepresented minority undergraduates, collectively, major in economics at 0.36 the rate that white, non-Hispanic male students do. This paper makes a four-part contribution to address this imbalance. First and foremost, we provide detailed comparative data at the institution level to provoke and inform the attention of economists and senior administrators at colleges and universities, among others. Second, we establish a definition of full inclusion in economic education on college and university campuses and use that definition to evaluate the status quo and to compare institutions. Third, we illuminate the reasons why the need to improve the distribution of economic education is urgent, including the imperative to support economic policymaking. Lastly, we point the way forward, identifying both currently available resources and reasonable next steps for all involved parties to take.
    Keywords: Education ; Ethnicity ; Race
    Date: 2017–10–19
  2. By: Monica Hernandez (Department of Economics, New School for Social Research)
    Abstract: This research examines the change in the pattern of foreign indebtedness of countries in Central America in the 2010s and its relation to the second phase of global liquidity generated with the implementation of rounds of quantitative easing (QE) policies by developed countries after the 2008 economic crisis, as well as its implications. Drawing on an analysis of the Central American countries’ sectoral balances, their historic dependence on bank lending, and on their contemporary sources of funding, we find that the international bond market has become an important source of debt for these economies in the last decade but that, in contrast to the case of some big emerging economies around the world, the role of non-financial corporations’ foreign bond issuance is not so relevant in the case of Central America. By classifying these countries’ international debt securities by residence and nationality of issuer, we also identify another difference with big emerging economies and conclude that the financial fragility of some of these countries has been exacerbated more by the general government’s foreign bonds issuance than by the financial and non-financial corporations’ ones.
    Keywords: Monetary policy coordination, quantitative easing, developing countries
    JEL: N1 E58 E61
    Date: 2017–10
  3. By: Philippe Gillig
    Abstract: This paper deals with a debate about the universality of the “desire of wealth” in John Stuart Mill’s thought. The debate occurred in the literature about fifteen years ago, when Samuel Hollander and Sandra Peart published in 1999 a criticism of Abraham Hirsch and Neil De Marchi’s interpretation of Mill’s methodology. This article constitutes an attempt to solve the debate by providing a rationale for the disagreement between both sets of scholars. In particular, we show that the divergence between them comes from the fact that they ground their respective arguments using different texts, while neglecting that Mill gradually changed his mind in his writings subsequent to the 1836 essay entitled “On the Definition of Political Economy...”. First, in accordance with the development of his ethology, Mill deprived the maximizing behavior of its universal validity; then, Mill focused more and more on “competition” as economics’ basic axiom in order to stress its historical relevance; and finally Mill strengthened the relativity of the behavioral axiom with the introduction of the concept of “custom”.
    Keywords: homo œconomicus; universal laws; John Stuart Mill; economic methodology.
    JEL: B12 B41
    Date: 2017
  4. By: Nägele, Johannes
    Abstract: Recently, the debate about the employment effects of a working time reduction regained the public attention in Germany. Heiner Flassbeck and Friederike Spiecker commented that such a reduction of working-time leads to a falling household consumption due to the lower income of the employees while new men are not employed instantly. In the end, the creation of new jobs becomes obsolete as the sales of the companies shrink. Fritz Helmedag criticizes their analysis. He instead comes to the conclusion that it is necessary not only to adjust the wages to the productivity growth but also to reduce the working time by the same amount the productivity grows; otherwise a higher unemployment is implied under stagnating demand. In this paper it is shown that Helmedag´s analysis suffers from serious analytical inconsistencies. Firstly, his model can be identified as a Keynesian textbook model. For this reason, the relevance for policy conclusions can be seriously doubted. Secondly, the key elements of Flassbeck and Spiecker`s argumentation can be implemented in the model easily. Therefore even within Helmedag´s model the results can differ. Some results can also be attributed to an implicit price stability. Thirdly, the model´s assumptions are highly unrealistic. Furthermore, even basic accounting rules are disregarded as the balance of the primary incomes is missing. This appears to be especially paradox when the core element of Helmedag´s approach is stock-flow consistency. After this examination of Helmedags work, an alternative Keynesian analysis – although heuristic – is provided. It turns out that a working time reduction can lead to significant positive employment effects. Nevertheless, it depends on the concrete shape of the conduction. Considering the current political landscape, heading towards more fiscal stimulus should be preferred to a reduction of working time.
    Keywords: work-sharing; working hours; unemployment; employment; Germany; Keynesianism; Saldenmechanik;
    JEL: E12 E24 E66 J22 J23 J60
    Date: 2017–10–17
  5. By: Carlin, Wendy; Soskice, David
    Abstract: A major challenge is to build simple intuitive macroeconomic models for policy-makers and professional economists as well as students. A specific contemporary challenge is to account for the prolonged slow growth and stagnant productivity that has followed the post-financial crisis recession, along with low inflation despite low unemployment (notably in the UK). We set out a simple three-equation model, which extends the core model in our two recent books (Carlin and Soskice, 2006, 2015) to one with two equilibria and two associated macroeconomic policy regimes. One is the standard inflation-targeting policy regime with equilibrium associated with central bank inflation targeting through monetary policy. It is joined by a second, Keynesian policy regime and equilibrium, with a zero lower bound (ZLB) in the nominal interest rate and a ZLB in inflation in which only fiscal policy is effective (Ragot, 2015). Our approach is related to the Benigno and Fornaro (2016) Keynesian–Wicksellian model of growth with business cycles. It diverges from New Keynesian models because although we attribute model-consistent expectations to the policy-maker, we do not assume that these are the basis for inflation and growth expectations of workers and firms. We compare our approach to Ravn and Sterk's related multiple equilibrium New Keynesian model (Ravn and Sterk, 2016).
    Keywords: inflation-targeting; liquidity trap; multiple equilibria; Stagnation; strategic complementarity; zero lower bound
    JEL: E32 E43 E52 O42
    Date: 2017–10
  6. By: Xiaoji Lin (Ohio State University); Nicholas Bloom (Stanford); Ivan Alfaro (The Ohio State University)
    Abstract: We show theoretically and empirically how real and financial frictions amplify the impact of uncertainty shocks on firms' investment, employment, debt (term structure of debt growth), and cash holding. We start by building a model with real and financial frictions, alongside uncertainty shocks, and show how adding financial frictions to the model roughly doubles the negative impact of uncertainty shocks on investment and hiring. The reason is higher uncertainty induces the standard negative real-options effects on the demand for capital and labor, but also leads firms to hoard cash and cut debt to hedge against future shocks, further reducing investment and hiring. We then test the model using a panel of US firms and a novel instrumentation strategy for uncertainty exploiting differential firm exposure to exchange rate and factor price volatility. We find that higher uncertainty reduces real investment and hiring, while also leading firms to increase cash holdings by cutting debt, dividends and stock-buy backs, and these effects are strongest in periods of higher financial frictions and for the most financially constrained firms. This highlights why in periods with greater financial frictions -- like during the global-financial-crisis -- uncertainty can be particularly damaging.
    Date: 2017

This nep-pke issue is ©2017 by Karl Petrick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.