nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2018‒07‒30
thirteen papers chosen by
Karl Petrick
Western New England University

  1. Short and medium term financial-real cycles: An empirical assessment By Engelbert Stockhammer; Robert Calvert Jump; Karsten Kohler; Julian Cavallero
  2. The Fragility of Emerging Currencies Since the 2000s: a Minskyan Analysis By Raquel Ramos
  3. The Challenges of Diversity in America: From the Black Perspective By Tunde Adeleke
  4. ‘Economics’ of prosperity: Why the dominant perspectives may be unhelpful to make sense of underdevelopment By Gupta, Avinash
  5. A note on IYLM, ISLM and General Theory-compatible modelling By Angel Asensio
  6. Anthropology and Economics: The Argument for a Microeconomic Anthropology By Jérôme Ballet
  7. Does technology cause business cycles in the USA? A Schumpeter-inspired approach By Konstantakis, Konstantinos N.; Michaelides, Panayotis G.
  8. A Test of Two Open-Economy Theories: Oil Price Rise and the Netherlands By Kavous Ardalan
  9. Janos Kornai and General Equilibrium Theory By Mehrdad Vahabi
  10. Wage-led vs. profit-led growth: a comprehensive empirical analysis By Oyvat, Cem; Öztunalı, Oğuz; Elgin, Ceyhun
  11. Humanism or Racism. Pilot Project Europe at the Crossroads By Hanappi, Hardy
  12. The collapse of Real Socialism in Eastern Europe: linking external and internal causes. By Gomes, Luiz
  13. Reaching the Hard to Reach with Intermediaries: The Kansas City Fed’s LMI Survey By Edmiston, Kelly D.

  1. By: Engelbert Stockhammer; Robert Calvert Jump; Karsten Kohler; Julian Cavallero
    Abstract: Theories such as Minsky's financial instability hypothesis or New Keynesian financial accelerator models assign a key role to financial factors in business cycle dynamics. We present descriptive statistics and a simple estimation framework to examine the financial-real interaction mechanisms that are at the core of these theories. Specifically, we examine cycle frequencies in seven OECD countries over the period 1970 to 2015, and find that interest rates, business debt, and household debt exhibit cycle lengths of 4-6, 8-11, and 14-26 years, respectively. We then estimate bivariate VAR models which provide evidence for financial-real interaction mechanisms, (i) at high frequencies between interest rates and GDP, and (ii) at low frequencies between business debt and GDP. In contrast, there is no evidence for a cycle mechanism between household debt and GDP.
    Keywords: Minsky, financial accelerator, financial cycle, business cycle
    JEL: E32 G01
    Date: 2018
  2. By: Raquel Ramos (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The currencies of a few emerging market economies (EME) have being following a specific dynamic since the early 2000s: they are strongly connected to financial markets internationally , appreciating in moments of tranquility and presenting sharp depreciations in peaks of uncertainty. What is the mechanism behind this specific dynamic that contradicts mainstream exchange-rate theories? To answer this question, this article applies the Minskyan framework to the context of money managers and their portfolio allocation decisions. The approach allows the analysis of these currencies through money managers' decisions, putting forward that these might float according to their balance-sheet constraints-reasons not related to the currencies themselves, but to money managers' assets, liabilities, and currency mismatch. The result is a dynamic characterized by deviation-amplifying system, the opposite of the equilibrium-seeking mechanism needed for clearing markets, and high frequency of depreciations associated to the global extent of these institutions' balance-sheet.
    Keywords: Exchange rates,emerging market economies,Minsky
    Date: 2017–10–19
  3. By: Tunde Adeleke (Iowa State University, African American Studies Program)
    Abstract: Diversity remains a contested and controversial subject. The depiction of America as a nation of diverse peoples remains visionary and aspirational. Molding America into one nation out of multiple and complex entities seems insurmountable. Black Americans have vigorously contested the representation of America as diverse and multicultural. A truly diverse and multicultural nation, critics contend, has to eradicate all trappings of ethno-cultural hegemony. Even as she strives for ?a more perfect union? America seems incapable of transcending the historical legacies of slavery and racism. From the ?melting pot? to the ?salad bowl? and more recent characterizations, America seems incapable of becoming an embodiment of her diverse peoples. An increasingly alienated black American population conceptualizes America within the discourse of alienation as a nation of permanently fractured racial and cultural identities. These blacks seek an alternative and countervailing African-derived protest identity?Afrocentrism. Thus they reject E Pluribus Unum (Out of many, one). Though America may seem multicultural, the ideal of one nation unifying and representing multiple cultures remains a distant and elusive aspiration. Skeptical of diversity, and distrustful of Multiculturalism, Afrocentrists offer an alternative African-centered philosophy of inclusiveness which, not surprisingly, critics denounce as inherently hegemonic and a negation of America?s celebration of plurality. This paper discusses the historical, social and cultural underpinnings of contemporary discourses and counter narratives about the prospects of diversity in America. It examines the challenges that Afrocentrism represents for defining what being ?American? truly means. There are two critical questions at the core of this paper: First, would multiple hyphenated American identities become the norm? Second, what are the implications of essentialist constructions of the black experience and identity for diversity and multiculturalism in America?
    Keywords: Diversity, Multiculturalism, Afrocentrism, African-Centered, Ethno-Cultural
    Date: 2017–07
  4. By: Gupta, Avinash
    Abstract: The article is essentially a book-review of Professor Vijay Joshi's recent work, '"India's Long Road: The Search for Prosperity". In this critical essay, I take a slightly revisionist approach when it comes to a 'typical'book review. For example, the length of this article goes well-beyond the standard convention. The ‘deviation’ from rules, however, has specific objectives. I have critically analyzed Dr. Joshi’s work and in so doing include relevant evidences, debates and questions not just from economics but also from other disciplines such as history and political science.
    Keywords: Underdevelopment, critical analysis, political and social dynamics in policy
    JEL: A23 B5 B52 H25 L5 N6 O1 O25 P26
    Date: 2018–07–02
  5. By: Angel Asensio (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In a recent article titled 'IYLM: a General Theory-compatible replacement to ISLM', Roderick O'Donnell and Colin Rogers (2016, Cambridge J. of Econ. 40(1), 349-364) offer a model claimed to be 'a representation of the GT's central general propositions' substantially different from the ISLM version. In this short note, it is shown that: a) the IY equation (product market equilibrium condition) is mis-specified, b) once the additional ‘overall equilibrium condition' i = mec is added, the IY-LM model is formally an IS-LM model. It is argued furthermore that the effects of the entrepreneurs' long-term expectations and of the state of liquidity preference can be made explicit in the investment and money demand functions to account for those highly Keynesian features within the IS-LM framework.
    Keywords: ISLM, IYLM, Keynes, macroeconomics, model
    Date: 2017–10–17
  6. By: Jérôme Ballet
    Abstract: The rapprochement between anthropology and economics is not a new subject of debate. Economic anthropology, whose very survival has largely been attributed to Marxism, remains a minor field of interest within anthropology and perhaps even more so within economics. Over recent years, researchers have argued that anthropology and economics should be interwoven, but few conceptual and empirical analyses have taken up the cause. The aim of this article is to promote a microeconomic anthropology. We discuss a contextual methodology and illustrate its advantages by way of interpersonal transfers.
    Keywords: Transfers, Contextualism, Rights and Obligations, Social Anthropology
    JEL: D01 B41
    Date: 2018
  7. By: Konstantakis, Konstantinos N.; Michaelides, Panayotis G.
    Abstract: The purpose of this paper is to deal with questions of instability and economic crisis, deriving theoretical arguments from Schumpeter’s works and presenting relevant empirical evidence for the case of the US manufacturing sector in the time period 1958-2006, just before the first signs of the global recession made their appearance. More precisely, we use a wide dataset that contains 473 manufacturing industries, that are clustered based on their annual change of hourly earnings per worker and we make an attempt to interpret the economic fluctuations in the clusters formed. Meanwhile, we study the causal relationships between the crucial variables dictated by Schumpeterian theory. In this context, a number of relevant techniques have been used, such as hierarchical clustering, canonical discriminant analysis, cointegration analysis, periodograms and Granger causality tests. Our findings seem to give credit to certain aspects of the Schumpeterian theory of business cycles. The results are discussed in a broader context, related to the US economy.
    Keywords: Economic Crisis; US Manufacturing sector; Schumpeter; Business Cycles.
    JEL: J1 G32
    Date: 2017–06–23
  8. By: Kavous Ardalan (Marist College)
    Abstract: Two major open-economy theories are the Keynesian and Monetarist theories. The goal of the study is to empirically discriminate between the two theories. Keynesian and monetarist views about the homeostatic mechanism are fundamentally different and provide a basis for constructing discriminatory empirical tests. The Keynesian theory holds that there is no, or only a very weak, homeostatic mechanism and, in the absence of government intervention, real income tends to remain below the level of full employment. In the monetary interpretation, the homeostatic mechanism is strong, and real income can be treated as though it were exogenous. This study examines the response of the Netherlands to the sharp increase in oil prices in late 1973. The experience of the Netherlands, as an oil-importing country, supports the Keynesian view.
    Keywords: Open Economy; Keynesian; Monetarist; Controversy; Oil Price Rise; Macroeconomics
    JEL: E00
    Date: 2017–07
  9. By: Mehrdad Vahabi (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper explores the evolution of Kornai's thought on General Equilibrium Theory (GET) and his position on mainstream economics. Three moments in this evolution will be highlighted starting by rejecting GET and advocating disequilibrium in Anti-Equilibrium (1971). While Kornai does not treat the 'equilibrium paradigm' as irrelevant, he suggests an alternative paradigm, namely economic systems theory that he further develops in the eighties as 'system paradigm'. Economics of Shortage (1980) marks a second phase in which Kornai distinguishes Walrasian equilibrium from normal state or Marshallian equilibrium. In this phase, he supports Marshallian equilibrium rather than disequilibrium. Finally By Force of Thought (2006) is a critical self-appraisal in which Kornai considers Anti-Equilibrium as a 'failure' and acknowledges GET as a benchmark of an ideal competitive market. He now advocates a Walrasian equilibrium as an abstract reference model but refuses to consider this model as a description of reality. In this sense, he refuses the New Classical economics. Paradoxically however, his original heterodox concept of 'soft budget constraint', irreconcilable with standard microeconomics, has been integrated in new microeconomics as an optimal intertemporal strategy of a maximizing agent in the absence of credible commitments. It will be argued that Kornai's so-called failure is rather related to his half-in, half-out mainstream position, while his institutionalist system paradigm is still a heterodox research project of the future.
    Keywords: Disequilibrium, Economic Systems Theory, General Equilibrium Theory,Marshallian and Walrasian Equilibrium, New Microeconomics, Normal State, System Paradigm
    Date: 2017–09–07
  10. By: Oyvat, Cem; Öztunalı, Oğuz; Elgin, Ceyhun
    Abstract: This study investigates the impact of various economic factors in determining the relationship between functional income distribution and economic growth. Inspired by the seminal paper of Bhaduri and Marglin (1990), we base our analysis on a demand-driven distribution and growth model for an open economy that allows for either profit-led or wage-led growth. To this end, we use a cross-country panel dataset consisting of 41 countries from 1961 to 2011. In the first step of the empirical analysis, we first estimate whether growth regime is wage-led or profit-led in each country. Next, in the second step, using probit and meta-regression approaches with cross-country data, we analyse the effects of various macroeconomic variables on the nature of economic growth. Our results strongly reflect that a higher level of trade openness is associated with a lower probability of being wage-led. Moreover, we find evidence that lower wage inequality would make an economy more wage-led and that countries with a greater private credit-to-GDP ratio are more likely to be profit-led.
    Keywords: Distribution; demand; economic growth; trade openness; Keynesian economics;
    JEL: E12 E25 E61 O47
    Date: 2018–07–12
  11. By: Hanappi, Hardy
    Abstract: This policy paper combines a large number of acute contemporary problems in political economy and shows that it is possible to bring them under one broad common umbrella: The choice between humanism or racism. To do so more fine grained definitions of humanism and racism are put forward. From that theoretical perspective the possible policy options for further European Integration are discussed. It is argued that Europe could be a role model for global evolution if it is possible to overcome racism and to use diversity as a creative force. As a driving agent for such a development the emerging class of organic intellectuals is identified.
    Keywords: Political Economy, Europe, Humanism, Racism
    JEL: F52 F54 F55 P16 P17
    Date: 2018–06–30
  12. By: Gomes, Luiz
    Abstract: The objective of this work is to critically discuss the collapse of Real Socialism in Eastern Europe through a perspective that brings together external and internal causes. The method employed for this is historical prospecting based on data and literature on the subject. The results indicate that the economic, social, and political contradictions of Real Socialism were the main causes for the end of this social regime. To achieve its objective, this work is divided into sections, which are organized according to a chronological order.
    Keywords: Eastern Europe, Economic History, Reforms, Socialism, Stalinism.
    JEL: P2
    Date: 2018–06–29
  13. By: Edmiston, Kelly D. (Federal Reserve Bank of Kansas City)
    Abstract: Reaching hard-to-reach individuals is a common problem in survey research. The low- and moderate-income (LMI) population, for example, is generally hard to reach. The Kansas City Fed’s Low- and Moderate-Income Survey addresses this problem by sampling a database of organizations to serve as proxies for the LMI population. In this paper, I describe why the LMI population can be hard to reach. I then explore potential problems with using a nonrandom survey sample and address the empirical validity of the Kansas City Fed’s LMI Survey. I compare results from the survey using the standard sample to results from the survey using a random sample. I find that the results of the surveys using the standard and random samples are not significantly different and conclude that the use of a nonrandom sample is not a significant problem for the LMI Survey. I find that the series of responses from the LMI Survey are correlated with the things they should be correlated with, suggesting that the survey is empirically valid and does a good job of measuring economic conditions in LMI communities.
    Keywords: Kansas City Fed Low and Moderate Income Survey; Hard to reach; Polls; Empirical validity; Nonrandom
    JEL: C81 C83 I32
    Date: 2018–07–16

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