nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒06‒22
thirteen papers chosen by
Karl Petrick
Western New England University

  1. "Notes on Intersectional Political Economy: The Long Period Method, Technical Change, and Gender" By Luiza Nassif Pires
  2. Is capacity utilization variable in the long run? An agent-based sectoral approach to modeling hysteresis in the normal rate of capacity utilization By Federico Bassi; Tom Bauermann; Dany Lang; Mark Setterfield
  3. Financialization and Endogenous Technological Change: a Post-Kaleckian Perspective By Parui, Pintu
  4. Debunking the granular origins of aggregate fluctuations : from real business cycles back to Keynes By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  5. Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016 By Alina K. Bartscher; Moritz Kuhn; Moritz Schularick; Ulrike I. Steins
  6. Change is always a last resort a change in habits of thought: For a new biodiversity of cognition in the face of today's Crisis By Graupe, Silja
  7. "The Impact of Technological Innovations on Money and Financial Markets" By Jan Kregel; Paolo Savona
  8. "Greece's Economy after COVID-19" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  9. COVID-19: macroeconomic dimensions in the developing world By Tony Addison; Kunal Sen; Finn Tarp
  10. "An Empirical Analysis of Long-Term Brazilian Interest Rates" By Tanweer Akram; Syed Al-Helal Uddin
  11. Economic phenomenology: fundamentals, principles and definition By Francesco Vigliarolo
  12. "A Stock-Flow Consistent Quarterly Model of the Italian Economy" By Francesco Zezza; Gennaro Zezza
  13. Poverty, Depression, and Anxiety: Causal Evidence and Mechanisms By Matthew W. Ridley; Gautam Rao; Frank Schilbach; Vikram H. Patel

  1. By: Luiza Nassif Pires
    Abstract: This paper presents a critique of Karl Marx's labor theory of value and his theory of falling profit rates from an intersectional political economy perspective. Specifically, I rely on social reproduction theory to propose that Marx-biased technical change disrupts the social order and leads to competition between workers. The bargaining power of workers cannot be dissociated from class struggle within the working class. I argue that technical change increases social conflict, which can counterbalance the long-run tendency of the profit rate to fall. The conclusion is that class struggle is multilayered and endogenous to the process of accumulation.
    Keywords: Political Economy; Social Reproduction Theory; Gender and Racial Economics; Labor Unions; Technical Change
    JEL: B54 B51 J51 O33
  2. By: Federico Bassi (Centre de recherche en économie de l’Université Paris Nord (CEPN) and Université Sorbonne Paris Nord); Tom Bauermann (Ruhr-University Bochum and Ruhr-Graduate School in Economics); Dany Lang (Université Sorbonne Paris Nord); Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: Post Keynesian macrodynamic models make various assumptions about the normal rate of capacity utilization. Those rooted in the Classical and neo-Keynesian traditions assume the normal rate is fixed, whereas Kaleckian models treat it as a variable that is endogenous to the actual rate of capacity utilization. This paper contributes to the debate about the normal rate of capacity utilization by developing a model of strong or genuine hysteresis, in which firms make discrete decisions about the normal rate depending on the degree of uncertainty about demand conditions. An agent-based model based on empirical analysis of 25 sectors of the US economy is used to show that hysteresis can cause variation in the normal rate of capacity utilization within a subset of the range of observed variation in the actual capacity utilization rate. This suggests that the economy exhibits both constancy and (endogenous) variability in the normal rate of utilization over different ranges of variation in the actual rate. More broadly speaking, the genuine hysteresis model is shown to provide the basis for a synthesis of Post Keynesian macrodynamics that draws on both the Classical/neo-Keynesian and Kaleckian modeling traditions.
    Keywords: Normal rate of capacity utilization, Harrodian instability, genuine hysteresis, Kaleckian growth theory
    JEL: C63 E11 E12 L6 L7 L9
    Date: 2020–06
  3. By: Parui, Pintu
    Abstract: In post-Keynesian literature, Hein (2012a) was the first to incorporate financialization as an influential positive determinant of the rate of technological change. However, financialization is more like a two-edged sword which can affect technological change negatively as well. We capture both the positive as well as the negative effect of financialization on technological change which encapsulates the possibility of multiple equilibria. In analyzing the long run of the model we endogenize the financialization parameter as well and get richer dynamics than Hein (2012a). We show that under certain circumstances, the higher speed of diffusion of technological innovation, more regulated financial markets, and higher intra-class competition among firms are desirable for stabilizing the economy. Finally, we provide some policy prescriptions for the same.
    Keywords: Capital accumulation, Distribution, Financialization, Kaleckian model, technological change, Andronov–Hopf bifurcation, Limit cycles
    JEL: C62 C69 D33 E12 G01 O16 O41
    Date: 2018–10–05
  4. By: Giovanni Dosi (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies); Mauro Napoletano (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Andrea Roventini; Tania Treibich (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: In this work we study the granular origins of business cycles and their possible underlying drivers. As shown by Gabaix (Econometrica 79:733–772, 2011), the skewed nature of firm size distributions implies that idiosyncratic (and independent) firm-level shocks may account for a significant portion of aggregate volatility. Yet, we question the original view grounded on "supply granularity", as proxied by productivity growth shocks – in line with the Real Business Cycle framework–, and we provide empirical evidence of a "demand granularity", based on investment growth shocks instead. The role of demand in explaining aggregate fluctuations is further corroborated by means of a macroeconomic Agent-Based Model of the "Schumpeter meeting Keynes" family Dosi et al. (J Econ Dyn Control 52:166–189, 2015). Indeed, the investigation of the possible microfoundation of RBC has led us to the identification of a sort of microfounded Keynesian multiplier.
    Keywords: Business cycles,Granular residual,Granularity hypothesis,Agent-based models,Firm dynamics,Productivity growth,Investment growth
    Date: 2019–03
  5. By: Alina K. Bartscher; Moritz Kuhn; Moritz Schularick; Ulrike I. Steins
    Abstract: This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level data set that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. housing debt between the 1980s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.
    Keywords: household portfolios; inequality; financial fragility; household debt
    JEL: D14 D31 E21 E44
    Date: 2020–05–01
  6. By: Graupe, Silja
    Abstract: The present crisis has revealed that around the globe we are often only able to react to crises when it is (almost) too late. This paper addresses and explains the mono-structure of thought that has led to this predicament and delineates a new model of cognition capable of creating a new biodiversity of thought and action, especially in the economic sphere. With this, future crises may not only be overcome but may also contribute to avoiding them altogether. This paper offers a vision which does not provide ready-made answers but rather aims more fundamentally at opening up a wholly new imaginative scope for the possible.
    Keywords: Sensus Communis,Behavioral Economics,Economics,Pluralism,Epistemology,Standard Economics,Economic Education
    JEL: A13 A20 B13 B20 B41 B50 P40 Z13
    Date: 2020
  7. By: Jan Kregel; Paolo Savona
    Abstract: According to Senior Scholar Jan Kregel and Paolo Savona, attempting to maintain the status quo in the face of the introduction of some recent technological innovations--chiefly cryptocurrencies and associated instruments based on distributed ledger technology, the deployment of artificial intelligence, and the use of data science in financial markets--will create risks that increase instability and threaten national financial systems. In this policy brief, they analyze the impacts of these innovations on the present institutional environment and outline an appropriate regulatory framework. Kregel and Savona argue that a public monopoly on the issuance of cryptocurrency could promote financial stability and help repair the dissociation between finance and the real economy.
    Date: 2020–06
  8. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: Greece's fragile economic recovery was halted by the COVID-19 pandemic: GDP, employment, exports, and investment are expected to record significantly negative trends. While some projections for GDP growth show a quick V-shaped recovery beginning in 2021, this is rather improbable given the Greek economy's structural inefficiencies. This strategic analysis explores the consequences of various assumptions about the fall in the different sources of aggregate demand in order to produce a baseline projection for the Greek economy. A more optimistic scenario is also analyzed, in which the European Commission's recently announced Recovery Fund materializes, allowing the government to increase public consumption as well as investment through EU grants and loans. The authors recommend additional measures to alleviate the impact of the shock and help put Greece’s economy back on track when the epidemic has died out.
    Date: 2020–05
  9. By: Tony Addison; Kunal Sen; Finn Tarp
    Abstract: The COVID-19 pandemic represents an unprecedented global crisis. The task for economic policy is to help keep people alive, enterprises afloat, and households out of poverty. The pandemic has macroeconomic dimensions. First, it affects macroeconomic stability and growth. Second, the tools of macroeconomic policy?fiscal and monetary policy together with debt management and exchange rate policy?must deal with the economic shock. Simultaneously, policy makers must find fiscal space to fund health, social protection, and livelihood support.
    Keywords: commodities, COVID-19, Debts, Growth, Inequality, Macroeconomic policy, Poverty
    Date: 2020
  10. By: Tanweer Akram; Syed Al-Helal Uddin
    Abstract: This paper empirically models the dynamics of Brazilian government bond (BGB) yields based on monthly macroeconomic data in the context of the evolution of Brazil’s key macroeconomic variables. The results show that the current short-term interest rate has a decisive influence on BGBs’ long-term interest rates after controlling for various key macroeconomic variables, such as inflation and industrial production or economic activity. These findings support John Maynard Keynes’s claim that the central bank’s actions influence the long-term interest rate on government bonds mainly through the short-term interest rate. These findings have important policy implications for Brazil. This paper relates the findings of the estimated models to ongoing debates in fiscal and monetary policies.
    Keywords: Brazilian Government Bonds; Long-Term Interest Rate; Bond Yields; Monetary Policy; Short-Term Interest Rate; Banco Central do Brasil (BCB)
    JEL: E43 E50 E58 E60 G10 G12
  11. By: Francesco Vigliarolo (Catholic University of La Plata)
    Abstract: One of the tensions in economics, that has spanned the last few centuries, has undoubtedly been the dichotomy between dialectical materialism and idealism, which ended up laying the foundations between structure and superstructure, taking up the important philosophical questions faced in past centuries. This tension also ended up entering the economic visions between determinists/liberalists and interventionists, both engulfed by positivism and mathematical reason that has left out any transcendental dimension. With these assumptions, this article pretends to present the fundamentals of economic phenomenology, a branch of phenomenology that studies economics in the formation of its primary ideas in response to the economic positivism that left any transcendental dimension and questions out of the economics science, such as: what kind of society do we want? In this context, the principles of economic phenomenology take form from the relationship between subject (intention) and materiality, noesis and noema (Noesis is the intention, the subjective dimension. Noema, is the object thought in subjective terms), which always presupposes a concept, an idea that can be interpreted in everyday life. In this direction, it also proposes the presuppositions, the method, some concepts and theories of which economic phenomenology is composed. Among these, the concepts of ontological reason, Peoples rights demand, the meso-economy and the theory of wages in order to interpret the vision of life that underlies economic systems.
    Keywords: economics,positivism,phenomenology,theory,ontology
    Date: 2020–03–30
  12. By: Francesco Zezza; Gennaro Zezza
    Abstract: Macroeconomists and political officers need rigorous, albeit realistic, quantitative models to forecast the future paths and dynamics of some variables of interest while being able to evaluate the effects of alternative scenarios. At the heart of all these models lies a standard macroeconomic module which, depending on the degree of sophistication and the research questions to be answered, represents how the economy works. However, the complete absence of a realistic monetary framework, along with the abstraction of banks and more generally of real-financial interactions, not only in dynamic stochastic general equilibrium (DSGE) models but also in central banks' structural econometric models, made it impossible to detect the rising financial fragility that led to the Great Recession. In this paper, we show how to address the missing links between the real and financial sectors within a post-Keynesian framework, presenting a quarterly stock-flow consistent (SFC) structural model of the Italian economy. We set up the accounting structure of the sectoral transactions, describing our "transaction matrix" and "balance sheet matrix," starting from the appropriate sectoral data sources. We then "close" all sectoral financial accounts, describe portfolio choices, and define the buffer stocks for each class of assets and sector in the model. We describe our estimation strategy, present the main stochastic equations, and, finally, discuss the main channels of transmissions in our model.
    Keywords: Empirical Stock-Flow Consistent Models; Monetary Policy; Italy
    JEL: C54 E12 E17 E44 E58
  13. By: Matthew W. Ridley; Gautam Rao; Frank Schilbach; Vikram H. Patel
    Abstract: Why are people living in poverty disproportionately affected by mental illness? We review the interdisciplinary evidence of the bi-directional causal relationship between poverty and common mental illnesses — depression and anxiety — and the underlying mechanisms. Research shows that mental illness reduces employment and therefore income and that psychological interventions generate economic gains. Similarly, negative economic shocks cause mental illness, and anti-poverty programs such as cash transfers improve mental health. A crucial next step toward the design of effective policies is to better understand the mechanisms underlying these causal effects.
    JEL: D03 I1 I3 O1
    Date: 2020–05

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