nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2019‒10‒28
nine papers chosen by
Karl Petrick
Western New England University

  1. A new developmentalist model of structural change, economic growth and middle-income trap By Jose Luis Oreiro; Kalinka Martins da Silva
  2. Modelling Minskyan financial cycles with fundamentalist and extrapolative price strategies: An empirical analysis via the Kalman filter approach. By Filippo Gusella
  3. "The Macroeconomic Loss Due to Violence against Women and Girls: The Case of Ghana" By Srinivas Raghavendra; Kijong Kim; Sinead Ashe; Mrinal Chadha; Felix Asante; Petri T. Piiroinen; Nata Duvvury
  4. The Econ in Econophysics By Anwar Shaikh
  5. The Chilean economy since the return to democracy in 1990. On how to get an emerging economy growing, and then sink slowly into the quicksand of a “middle-income trap” By Palma, J. G.
  6. Keynes und die Finanzmärkte. Auf halbem Weg vom "homo oeconomicus" zum "homo humanus" By Stephan Schulmeister
  7. Oral presentation modeling in the EFL classroom By Orit Zeevy-Solovey
  8. Tariffs and Politics: Evidence from Trump’s Trade Wars By Fetzer, Thiemo; Schwarz, Carlo
  9. De-democratisation and rising inequality: the underlying cause of a worrying trend By Freeman, Dena

  1. By: Jose Luis Oreiro (Universidade de Brasília (BR)); Kalinka Martins da Silva
    Abstract: Despite the growing literature on new developmentalism published in the last 5 years, which includes a textbook published in 2015, up to now the ideas of the Brazilian New Developmentalist School were no longer presented in terms of a coherent formal growth model. The main objective of the present article is precisely to fulfill this gap, presenting a formal model of structural change and economic growth according to the New Developmentalism theoretical propositions. The model to be presented here is, in a large sense, a synthesis between ideas presented by the Classical Development Theory and Post Keynesian Theory of Demand Led-Growth and can be used to explain the Middle-Income Trap (MIT), in which many developing countries seems to be stuck. According to Glawe and Wagner (2016) a MIT usually refers to countries that have experienced rapid growth and thus quickly reached middle-income status, but then failed to overcome that income range to further catch up to the developed countries. That was precisely the case of middle-income Latin American countries such as Brazil and Argentine. New developmentalism asserts that a MIT can occur in countries where Dutch disease suddenly appears due to the discovery of natural resources (for example, new petroleum reserves in Brazil after 2006) or ceased to be neutralized and/or the adoption of an external savings growth strategy. In both cases, real exchange rate overvaluation is the ultimate consequence of a class coalition between workers and the rentier class that favors exchange rate appreciation due to its positive effects over inflation and real wages, on one hand; and financial income, on the other (Bresser-Pereira, 2015).
    Keywords: New Developmentalism, Demand-Led Growth, Structural Change and Real Exchange Rate
    JEL: O11 O14 O40
    Date: 2019–10
  2. By: Filippo Gusella
    Abstract: In this paper we empirically analyse Minskyan financial cycles in asset prices, where the cycles are driven by the presence of two unobserved evaluation price strategies: the fundamentalist and the extrapolative price strategy. To achieve this, we construct a model, that incorporates the two behavioural equations and we investigate the financial cycles via a state space model. Using the Kalman filter, the conditions for the existence of cycles can be evaluated empirically. The model is estimated for four OECD countries using the times series of equity and housing prices over the period 1970-2017 for annual data. We find evidence of cycles in the equity market for the UK, France, Germany and the USA. Regarding housing prices, we find evidence of cyclical fluctuations in the UK, France and the USA but not in Germany. For both the equity market and the housing market, we find the highest price overshooting in the UK and the USA. Our results provide empirical support for the Minskyan theory, highlighting the role of the evaluation effect for an endogenous generation of cyclical phenomena in asset prices.
    Keywords: Minsky cycles, asset prices, financial instability hypothesis, state space model, Kalman Filter
    Date: 2019
  3. By: Srinivas Raghavendra; Kijong Kim; Sinead Ashe; Mrinal Chadha; Felix Asante; Petri T. Piiroinen; Nata Duvvury
    Abstract: Violence against women and girls (VAWG) is a widely recognized human rights violation with serious consequences for the health and well-being of women and their families. However, the wider ramifications of VAWG for businesses, communities, economies, and societies are only recently being recognized. Despite this recognition, there are few studies exploring how the economic and social impacts of VAWG affect economic growth, development, and social stability. In this paper, applying the social accounting approach, we outline the ripple effects of VAWG from the individual micro-level impacts to the macroeconomy. Our analysis shows the loss due to VAWG amounts to about 0.94 percent of Ghanaian GDP and is a permanent invisible leakage from the circular flow of the economy. The analysis also shows that the loss due to violence is not just a one-off leakage from the macroeconomic circular flow and explores the potential consequences of the multiplier loss due to VAWG over a period of time. The cumulative loss is sizeable and inflicts a premium on GDP growth over time--in simple terms, inaction today in addressing VAWG for cost considerations will impose a larger cost premium on economic growth, which will constrain tomorrow's resources.
    Keywords: Violence against Women and Girls; Social Accounting Matrix; Productivity Loss; Economic Growth
    JEL: E16 E19 J16 B54 O55
    Date: 2019–10
  4. By: Anwar Shaikh (Department of Economics, New School for Social Research)
    Abstract: Modern authors have identified a variety of striking economic patterns, most importantly those involving the distribution of incomes and profit rates. In recent times, the econophysics literature has demonstrated that bottom incomes follow an exponential distribution, top incomes follow a Pareto, profit rates display a tent-shaped distribution. This paper is concerned with the theory underlying various explanations of these phenomena. Traditional econophysics relies on energy-conserving “particle collision” models in which simulation is often used to derive a stationary distribution. Those in the Jaynesian tradition rely on entropy maximization, subject to certain constraints, to infer the final distribution. This paper argues that economic phenomena should be derived as results of explicit economic processes. For instance, the entry and exit process motivated by supply decisions of firms underlies the drift-diffusion form of wage, interest and profit rates arbitrage. These processes give rise to stationary distributions that turn out to be also entropy maximizing. In arbitrage approach, entropy maximization is a result. In the Jaynesian approaches, entropy maximization is the means.
    Keywords: Economics, arbitrage, econophysics, income distribution, profit distribution, statistical mechanics, Jaynes
    Date: 2019–10
  5. By: Palma, J. G.
    Abstract: The main hypothesis of this paper is that the Chilean economy's poor performance over the last two decades (e.g., average productivity growth collapsed by three quarters vis-à-vis the previous cycle) results from its development strategy having run its course -being now in desperate need of a full “upgrade” (one capable of generating new engines of productivity growth; e.g., the industrialisation of commodities, a “green new deal”, or the spread of the new technological paradigm to the four corners of the economy). The same can be said of the neo-liberal ideology at its foundations, as most of its “absolute certainties” are being shaken to the core. However, neither the (not so) invisible hand of distorted markets, nor centre-left or centre-right governments have had much of a clue as to how to bring this change about. There is also (unlike, say, in some Asian economies) a generalised lack of nerve to do anything about it. Consequently, the Chilean economy is now jammed in a rather transparent -and self-made- “middle-income trap”. In fact, change has come in the opposite direction: in order to reinforce the growingly fragile status quo, a new policy-straightjacket has been added in the form of the Transpacific Treaty, or TPP-11, which gives large corporations (foreign and domestic) a de facto veto against any change in policy. In turn, the advanced countries’ “reverse catching-up” isn’t helping either, as this also helps reinforce the convictions of those in Chile defending the status quo. We are all now indeed converging in the West, north and south, but towards Latin American features such as mobile élites creaming off the rewards of economic growth, and ‘magic realist’ politics that lack self-respect if not originality. In fact, it is now even tempting to say to those in the high-income OECD “Welcome to the Third World”.
    Keywords: Chile, Latin America, emerging Asia, Catching-up, “Reverse catching-up”, Export “upgrading”, Productivity, Immigration, “premature” de-industrialisation, Keynes, Hirschman, Foucault, Neo-liberalism, Inequality, Rent-seeking
    JEL: B52 E20 F13 F53 H54 J20 L52 N16 N66 O16 O40 P50
    Date: 2019–10–16
  6. By: Stephan Schulmeister
    Abstract: John Maynard Keynes war ein Ökonom, der stets zwischen der Welt der Theorien und der Realität pendelte, er prüfte und verwarf theoretische Annahmen aufgrund seiner Beobachtungen, die er wiederum als Ausgangspunkte für die Entwicklung neuer Theorien nutzte. Gleichzeitig betrieb er als Praktiker keine andere Art von Aktivitäten mit solcher Intensität und Kontinuität wie Finanzgeschäfte aller Art. Diese Erfahrungen machten für Keynes klar, dass ökonomisches Verhalten essentiell durch Unsicherheit, Emotionen und soziale Interaktion geprägt wird. In seiner Darstellung der Handels- und Preisdynamik auf Finanzmärkten (sie nimmt die wichtigsten Entwicklungen seit den 1970er-Jahren vorweg) entwirft er ein zum "homo oeconomicus" in radikalem Gegensatz stehendes Menschenbild. Allerdings hat er diese realitätsnahe Mikro-Fundierung seiner Makroökonomie nicht theoretisch ausformuliert, denn dann hätte er das gesamte Theoriegebäude der Neoklassik explizit verwerfen müssen. Dies aber hätte dem Hauptziel seiner "General Theory" widersprochen, seine "fellow economists" mit seiner Beschäftigungs-, Zins- und Geldtheorie dort abzuholen, wo sie sich befanden.
    Date: 2019–10–24
  7. By: Orit Zeevy-Solovey (Tel Aviv University)
    Abstract: The development of students? oral communicative competence in English is one goal of EFL courses at the tertiary level. Creating and delivering English oral presentations is a useful tool to improve learners? ability to communicate, and a major professional skill in students? future careers. In the context of oral presentations, various language skills are practiced: reading academic articles, composing both a coherent speech and content for a visual aid, and primarily speaking. Yet, students may face difficulties when they prepare for and deliver their presentations. This task is both linguistically challenging for non-native speakers of English and it is a cause of anxiety, nervousness, and lack of confidence. An effective way to ease these hardships is to use modeling, an instructional strategy in which the teacher demonstrates a process or a product that is representative of the skill or content the learners are expected to perform themselves. The teacher has to provide specific details so that students know what to do each step of the way. The purposes of this lecture are to demonstrate how an oral presentation task was modeled to students in a university EFL classroom and more specifically, how this modeling contributed to learners? comprehension and execution of the task.
    Keywords: communicative competence, EFL, modeling, oral presentation
    JEL: I29
    Date: 2019–10
  8. By: Fetzer, Thiemo (University of Warwick and CAGE, Department of Economics); Schwarz, Carlo (University of Warwick and CAGE, Department of Economics)
    Abstract: We use the recent trade escalation between the US,China, the European Union (EU), Canada and Mexico to study whether retaliatory tariffs are politically targeted. Using aggregate and individual-level data we find evidence that the retaliatory tariffs disproportionally targeted areas that swung to Trump in 2016, but not to other Republican candidates. We propose a novel simulation approach to construct counterfactual retaliation responses. This allows us to both quantify the extent of political targeting and assess the general feasibility. Further, the counterfactual retaliation responses allow us to shed light on the potential trade-offs between achieving a high degree of political targeting and managing the risks to ones own economy. China, while being constrained in its retaliation design, appears to put large weight on achieving maximal political targeting. The EU seems successful in maximizing the degree of political targeting, while at the same time minimizing the potential damage to its own economy and consumers.
    Keywords: trade war ; tariff ; targeting ; political economy ; elections ; populism
    JEL: F13 F14 F16 F55 D72
    Date: 2019
  9. By: Freeman, Dena
    Abstract: This article is concerned with the question of why economic inequality has increased so dramatically in recent decades and what can be done about it. It suggests that the fundamental cause of the recent rise in economic inequality, underlying all the more proximate factors, is a major process of de-democratisation that has taken place since the 1970s, which has increased the political representation of capital while reducing that of labour. The article pulls together a wide range of research from different disciplines in order to decisively show the ways in which economic governance has been de-democratised in this period. This analysis has important consequences with regard to policy attempts to reduce inequality and suggests that these must focus not on technical issues but on ways to strengthen democracy. And if the dynamics of de-democratisation are fundamentally global, then solutions must also be global. These conclusions are in stark contrast with current academic and policy approaches which tend to focus on technical, rather than political, solutions, and which focus overwhelmingly at the national, rather than the global, level. This article thus calls for a major rethinking of the causes of rising inequality and the policy changes needed to reduce it.
    JEL: N0
    Date: 2018–04–18

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