nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2020‒12‒14
eight papers chosen by
Karl Petrick
Western New England University

  1. Post-Keynesian macroeconomic foundations for Comparative Political Economy By Engelbert Stockhammer
  2. Modeling Consumption and Saving Decision Making Behavior of People in the Settings of Urban Eastern Ethiopian Communities : A Heterodox Economics Approach. By Demiessie, Habtamu
  3. The macroeconomic effects of migrants’ remittances in Moldova: a stock–flow consistent model By Edwin Le Héron; Nicolas Yol
  4. "Balance Sheet Effects of a Currency Devaluation: A Stock-Flow Consistent Framework for Mexico?" By Lorenzo Nalin; Giuliano Toshiro Yajima
  5. Towards an evolutionary political economy. Editorial to the inaugural issue of the Review of Evolutionary Political Economy REPE By Nathalie Lazaric; Silvano Cincotti; Wolfram Elsner; Anastasia Nesvetailova; Engelbert Stockhammer
  6. Institutional and Behavioral Modeling of the Economic Fabric of Urban Eastern Ethiopian Communities: Shared Value System, Group Decision Making Behavior and Wellbeing By Demiessie, Habtamu
  7. The Logic of Attraction: Outline of a Theory of Soft Power By Vuving, Alexander
  8. Commodities are Not Industries! A Value Chain Example By Randall Jackson; Patricio Aroca

  1. By: Engelbert Stockhammer (None)
    Abstract: Since the global financial crisis and the ensuing weak growth interest in macroeconomic issues has grown within Comparative Political Economy (CPE). The dominant Varieties of Capitalism approach focuses on how different institutional arrangements contribute to competitiveness and thus has a strong supply-side focus, which is complementary with modern mainstream economics. Baccaro and Pontusson (2016) have suggested basing CPE on post-Keynesian theory of distribution and growth. This paper generalises their point and makes a systematic case for post-Keynesian (PK) foundations for CPE. It highlights the PK theory of money and finance and that PKE analyses inequality as well as financial relations as based on class and power relations. The paper identifies the analysis of financialisation, financial cycles, the understanding of neoliberal growth models and the political economy of central banks as areas where PKE can provide specific insights for CPE.
    Keywords: post-Keynesian economics, comparative political economy, growth models, financial instability
    JEL: E02 E12 P50
    Date: 2020–12
  2. By: Demiessie, Habtamu
    Abstract: This study is aimed at modeling the essential behavioral and institutional aspects of the economic fabric of urban eastern Ethiopian communities with an emphasis on consumption/saving regime. Analysis made was based on interdisciplinary approach. The principles of a hypothetical research govern key aspects of inferences made. The study hypothesized that the essential construct of the consumption/saving regime is by product of shared value system in the communities of interest. In this regard, the shared value system is the result of a more or commonly shared environment (economic, socio-cultural, political, past governance, geographic and geo-political) by urban eastern Ethiopian communities in the past and present. The importance of shared value system is interpreted in shaping consumption/saving decision making behavior of people in its implications to making life uncertain/risky. The study found out that the constructs of prevailing consumption/saving regime is behavioral and institutional response mechanisms people/households/communities design to cope up the uncertain/risky nature of life in general and that of their economic life in particular. As prevailing uncertainties in life are not faced and/or felt equally by people/households/communities, generalization made on behavioral and institutional features of the consumption/saving regime is not linear across the board. In this regard, the potency of behavioral and institutional modeling made on consumption/saving regime is subjected to variations across individuals/communities of various entities: income/ occupational/ consumption groups; generations; locations (urban versus rural); socio demographic variables, among others. The study further concludes that consumption/saving decision of individuals and/or the overall economic fabric in the settings of eastern Ethiopian communities is a complex phenomenon which is not only motivated by economic factors, but triggered by a host of non economic determinants attributed to psychological,psychosocial, sociological, anthropological and geographical variables. Therefore, academic and policy interventions meant to study/influence the consumption/saving regime in the case of urban eastern Ethiopian communities requires considering the mentioned economic and non economic variables with an interdisciplinary/multi sectoral tools/approaches.
    Keywords: Eastern Ethiopia Shared Value System Consumption Decision Process Group Decision Making
    JEL: B52 E21 J17 Z1
    Date: 2020–11–13
  3. By: Edwin Le Héron; Nicolas Yol (Observatoire français des conjonctures économiques)
    Abstract: Migrants’ remittances are an essential source of income in many developing countries. In this article, we build a post-Keynesian stock–flow consistent model adapted to Moldova, one of the top recipients of remittances. In addition to increasing household consumption, migrants’ transfers have strong effects on economic growth in Moldova. However, remittances are very sensitive to the economic conditions in migrants’ destination countries, especially since the 2008 global financial crisis. After including remittances in consumption behavior and lenders’ risk, we run simulations to show how shocks in migrants’ destination countries (that is, Europe and Russia) impact the Moldovan economy through fluctuations in remittances. First, the increasing instability of remittances explains a significant portion of the economic volatility experienced by Moldova. Second, the high level of imports implies a weak multiplier effect of remittances, leading to an unsustainable pattern of growth.
    Keywords: Remittances; Moldova; Stock-flow consistent models; Business cycles; Migration; Volatility
    JEL: E12 E32 F22 F24 F43
    Date: 2019–04
  4. By: Lorenzo Nalin; Giuliano Toshiro Yajima
    Abstract: This working paper empirically and theoretically analyzes the exchange rate's role in Mexico's development for the period 2004-19. We test the hypothesis of the re(emergence) of the balance sheet effect due to an increase in external debt in the nonfinancial corporate sector; higher foreign debt would affect private investment after episodes of real currency depreciation, in the spirit of the literature put forward by Gertler, Gilchrist, and Natalucci (2007) and Céspedes, Chang, and Velasco (2004). We build a stock-flow consistent (SFC) model, following the OPENFLEX model proposed in Godley and Lavoie (2006), to explore the balance sheet implications from a theoretical perspective. We simulate the 2014 fall in the Mexican peso generated by the drop in oil prices to replicate stylized facts for Mexico for the period under investigation. The scenario analysis points to a hysteresis effect of the real exchange rate (RER) depreciation on investment flows. That is, firms' investment ratio does not completely recover from negative shocks in the currency.
    Keywords: International Finance Forecasting and Simulation; Models; Applications; Foreign Exchange; Macro-Based Behavioral Economics
    JEL: F37 F31 E7
    Date: 2020–12
  5. By: Nathalie Lazaric (Université Côte d'Azur, CNRS, GREDEG (France)); Silvano Cincotti (UNIGE - University of Genoa); Wolfram Elsner (University of Bremen); Anastasia Nesvetailova (City University London); Engelbert Stockhammer (King‘s College London)
    Date: 2020–05
  6. By: Demiessie, Habtamu
    Abstract: The essence of this study is to map the economic fabric of urban eastern Ethiopian communities. To that end, shared value system in the communities of interest was explored. The whole set of analysis and inferences were meant to hypothesize, conceptualize and/or characterize on key behavioral and institutional variables that defines the economic fabric of a particular society. Core behavioral and institutional variables subjected in this study that construct the group decision making behaviorswere: life style (philosophy of life), rationality of economic agents, life satisfaction, individualistic motives, workmanship traits, consumption and saving behavior. The study is essentially framed based on the principles of hypothetical research. By way of making inferences, techniques/tools from institutional/behavioral economics were borrowed. Moreover, theoretical and empirical evidences from positive psychology,behavioral economics, social economics, economic sociology & social anthropology were employed. The study found out that shared value system in the urban eastern Ethiopian setting manifests as in the followings: a) while making decisions, people often look the matter they supposed to decide in an absolute abstraction. It is customary that people are unwilling to look the pros and cons of their decisions. b) People try to disregard or even mitigate or 'avoid‘ the negative outcomes of their actions (decisions). The study inferred that the shared value system is a social construct meant to cope up from uncertainties arising out of uncertain (risky) nature of prevailing fabric of life, which is a typical feature of urban eastern Ethiopia. Furthermore, the study explained and/or hypothesized on how those behavioral elements are interpreted into wellbeing of people. More importantly, the behavioral/institutional modeling made can be used to understand the fabrics of collective/communal societies in general. Therefore, academic and research circles are expected to give due emphasis to probing why/how the prevailing shared values/institutional system would be progressive or retrogressive to wellbeing of people and communities of interest of the study. Moreover, policy regimes should consider those variables their concern, where interventions in this regard are expected to overcome retrogressive behavioral and institutional elements and nurture those which are progressive to wellbeing.
    Keywords: Eastern Ethiopian Communities Group Decision Making Behavior Involuntary Simplicity Wellbeing
    JEL: B5 B52 H3 J5 Z1
    Date: 2020–11–19
  7. By: Vuving, Alexander
    Abstract: This paper refines and further develops the concept of soft power with the aim of exploring the ways human power works and the assets that give rise to soft power. To this end, the paper will answer three central questions: What is soft power? Where does soft power come from? How does soft power works? Answering these questions requires fundamentally a global and systematic mapping of the power behaviors. This paper maps the power behaviors by identifying the basic ways of power, which include a hard way and a soft way of power-over and a hard way and a soft way of power-with. Soft power results from the soft way of power-with. The assets that give rise to soft power are positive agential qualities, not intangible resources as many assume. These positive agential qualities include not just kindness but also competence and commitment. This paper outlines the process that generates soft power and sheds light on the causal mechanisms, both at the behavioral and the psychological levels, through which soft power works. The paper benefits greatly from research in multiple disciplines, including biology, psychology, economics, anthropology, sociology, and political science. It involves substantially and links together various phenomena discussed in different fields of study: signaling, indirect reciprocity, generalized exchange, prestige, status, and leadership. With the integration of these phenomena into a theory of soft power, the paper is able to provide a better explanation of indirect reciprocity, a more comprehensive explanation of the strategic logic of prestige-seeking, and a deeper explanation of charisma, among others.
    Date: 2020–11–23
  8. By: Randall Jackson (Geology and Geography Department and Regional Research Institute, West Virginia University); Patricio Aroca (Business School, Universidad Adolfo Ibáñez)
    Abstract: Wassily Leontief received the 1973 Nobel Prize in Economics for his 1936 introduction input-output accounts and laying the foundations for decades of studies of economic structure and analyses of systemwide impacts of economic shocks (Leontief, 1936). In 1961, Richard Stone published “Input-Output and National Accounts,” which recognized and dealt explicitly with the realities of secondary production (?), and for which he received the 1984 Nobel Prize in Economics. Despite these recognitions and widespread use and acceptance internationally and in other disciplines and public sector planning applications, the Leontief and Stone framework gained little traction in mainstream U.S. economics. However, inputoutput modeling frameworks have attracted new attention in a variety of problem domains, including environmental attribution, water use, life-cycle assessment, and supply and value chains. Yet many – if not most – contemporary economists continue founding their work directly the Leontief framework, eschewing the power and versatility of Stone’s enhancements. Moreover, many are failing to understand and appreciate the conceptual differences between the two frameworks and as a result are failing to match constructs to variables in their their newly developed analytical metrics, even in top economics journals. In this paper, we use an increasingly common approach to value chains analysis as one of many possible examples that demonstrate such conceptual misunderstandings, and by developing and implementing properly formulated value chain metrics, we demonstrate both the extent of the consequences of neglecting the Stone enhancements and the important role of reproducing results in advancing scientific knowledge.
    Keywords: Input-Output, SNA, Value Chains, Primary and Secondary Products
    JEL: F10 F14 L16 L23 C67
    Date: 2020–10–12

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