nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒07‒27
six papers chosen by
Karl Petrick
Western New England University

  1. The Eurozone in crisis: A Kaleckian macroeconomic regime and policy perspective By Hein, Eckhard; Martschin, Judith
  2. "Fiscal Policy in Argentina, Brazil, and Mexico and the 2030 Agenda for Sustainable Development" By Bendreff Desilus
  3. The Role of Sentiment in the Economy of the 1920s By Ali Kabiri; Harold James; John Landon-Lane; David Tuckett; Rickard Nyman
  4. Introducing the Unemployment Claims Monitor By Stuart Andreason
  5. Michael Polanyi on Creativity in Science By Agnès Festré; Stein Østbye
  6. The Polarization of Reality By Alesina, Alberto F; Miano, Armando; Stantcheva, Stefanie

  1. By: Hein, Eckhard; Martschin, Judith
    Abstract: The current Covid-19 Crisis 2020 has hit the Eurozone in a highly fragile situation, with a weak and asymmetric recovery from the Great Financial Crisis, the Great Recession and the following Eurozone Crisis. These crises have also revealed the weaknesses of the macroeconomic policy institutions and strategies of the Eurozone based on New Consensus Macroeconomics (NCM). Applying a Kaleckian/post-Keynesian analysis of the demand and growth regimes to the EA-12 countries, we show that the internal imbalances within the EA-12 before the Eurozone crisis, with the polarization of current account deficit debt-led private demand boom countries, on the one hand, and of current account surplus export-led mercantilist countries, on the other hand, have been externalized since then. Most of the countries and the EA-12 as a whole have now turned export-led mercantilist. For an economic policy alternative favouring a domestic demand-led regime, we turn towards Kalecki's macroeconomic policy proposals for achieving and maintaining full employment in a capitalist economy by government deficit expenditures, in combination with re-distribution policies in favour of labour and low-income households, assisted by central banks targeting low interest rates. This approach is then applied to the Eurozone, in order to derive a policy mix which should contribute to a more rapid recovery from the Covid-19 Crisis and to a medium- to long-run non-inflationary full employment domestic demand-led regime, on the one hand, and to sustainable catching-up of the periphery of the Eurozone with respect to the more mature centre, on the other hand.
    Keywords: Eurozone crisis,Kalecki,demand and growth regime,macroeconomic policies
    JEL: E11 E12 E61 E63 E65
    Date: 2020
  2. By: Bendreff Desilus
    Abstract: Fiscal policy is useful as a government instrument for supporting the economy, contributing to an increase in employment, and reducing inequality through more egalitarian income distribution. Over the past 30 years, developing countries have failed to increase their real wages due to the lack of domestic value-added in the era of globalization, where global supply chains are the driving factor for attracting foreign direct investment. Under such circumstances, the role of fiscal policy has become an important factor in creating the necessary conditions for boosting the economy. With the end of commodity-export-led growth, Mexico experienced a moderate reduction of 5 percent in poverty between 2014 and 2018 due to the structural adjustment of social policies and its economic and trade relationship with the United States; during the same period there has been no change in poverty in Argentina, and Brazil has suffered a rise in poverty. Following the global financial crisis, greater attention has been paid to fiscal policy in developed and developing countries--specifically Argentina, Brazil, and Mexico (ABM)--in order to attain macroeconomic stability. One of the consequences of the financial crisis is rising income inequality and its negative effects on economic growth. Over the past decade, fiscal policy has been adopted for the economic recovery. However, the recovery has been accompanied by a decrease in real wages of the middle class. The purpose of the present research is to critically examine the results of fiscal policy in ABM and the United Nations' 2030 Agenda for Sustainable Development.
    Keywords: Wages; Inequality; Productivity; Full Employment; Sustainability; Government Policy
    JEL: E24 D63 J21 Q56 I38
  3. By: Ali Kabiri; Harold James; John Landon-Lane; David Tuckett; Rickard Nyman
    Abstract: John Maynard Keynes composed The General Theory as a response to the Great Crash and Great Depression with all their devastating consequences for the US macro economy and financial markets, as well as the rest of the world. The role of expectations his new theory set out has been widely accepted. The role of “animal spirits” he proscribed (i.e. the role of emotion in cognition) has remained much more controversial. We analyse over two million digitally stored news articles from The Wall St Journal to construct a sentiment series that we use to measure the role of emotion at the time Keynes wrote. An eight variable vector error correction model is then used to identify shocks to sentiment that are orthogonal to the fundamentals of the economy. We show that the identified “pure” sentiment shocks do have statistically and economically significant effects on output, money supply (M2), and the stock market for periods of the 1920s.
    Keywords: Great Depression, general theory, algorithmic text analysis, behavioural economics
    JEL: D89 E32 N10 N30
    Date: 2020
  4. By: Stuart Andreason
    Abstract: The COVID-19 pandemic has caused an unparalleled economic slowdown and record numbers of layoffs. Even casual economic observers have seen reports of millions of workers filing claims for unemployment insurance—between the weeks of March 21, 2020 and April 25, 2020, 19 percent of workers covered by unemployment insurance filed an initial claim—but what exactly does this mean for unemployment?1 It is important to understand exactly what an unemployment insurance (UI) claim represents and how it provides information on what is happening in the economy.
    Keywords: unemployment claims
    JEL: J64
    Date: 2020–05–06
  5. By: Agnès Festré (GREDEG CNRS; Université Côte d'Azur, France); Stein Østbye (University of Tromsø, Norway)
    Abstract: We can know more than we can tell. In this paper we discuss how Polanyi applies his tacit knowledge concept to approach creativity in science. We argue that Polanyi not only is a theoretician on creativity, but also a very creative educator aiming to communicate widely, thereby, increasing legitimacy of science. In order to make tacit knowledge and other concepts and ideas more accessible to the general public, he extensively used analogies alluding to visual representations and even made use of new innovative media like film to complement written expositions.
    Keywords: methodology, Michael Polanyi, creativity
    Date: 2020–06
  6. By: Alesina, Alberto F; Miano, Armando; Stantcheva, Stefanie
    Abstract: Americans are polarized not only in their views on policy issues and attitudes towards government and society, but also in their perceptions of the same factual reality. We conceptualize how to think about the ``polarization of reality'' and review recent papers that show that Republicans and Democrats view the same reality through a different lens. Perhaps as a result, they hold different views about policies and what should be done to address economic and social issues. We also show that providing information leads to different reassessments of reality and different responses along the policy support margin, depending on one's political leaning.
    Keywords: beliefs; Perceptions; Political Views; redistribution; Wealth Taxation
    Date: 2020–01

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