nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2022‒02‒14
eight papers chosen by
Karl Petrick
Western New England University

  1. Flexible exchange rates in emerging markets: shock absorbers or drivers of endogenous cycles? By Karsten Kohler; Engelbert Stockhammer
  2. "Estimating a Time-Varying Distribution-Led Regime" By Paul Carrillo-Maldonado; Michalis Nikiforos
  3. Growth and Distribution regimes under Global Value Chains: Diversification, Integration and Uneven Development By Arpan Ganguly; Danilo Spinola
  4. Equitable Green New Deal (GND) By Julia M. Puaschunder
  5. On the monetary nature of savings: a critical analysis of the Loanable Funds Theory By Giancarlo Bertocco; Andrea Kalajzić
  6. Demand-led industrialisation policy in a dual-sector small balance of payments constrained economy By Nomaler, Önder; Spinola, Danilo; Verspagen, Bart
  7. A Multi-Planet Species: Ethical and Environmental Impacts of Privatized Space Travel By Natalie Pierson
  8. "COVID-19 and Fiscal-Monetary Policy Coordination: Empirical Evidence from India " By Lekha Chakraborty; Harikrishnan S

  1. By: Karsten Kohler; Engelbert Stockhammer
    Abstract: While flexible exchange rates are commonly regarded as shock absorbers, heterodox views suggest that they can play a pro-cyclical role in emerging markets. This article provides theoretical and empirical support for this view. Drawing on post-Keynesian and structuralist theory, we propose a simple model in which flexible exchange rates in conjunction with external shocks become endogenous drivers of boom-bust cycles, once financial effects from foreign-currency debt are accounted for. We present empirical evidence for regular cycles in nominal US-dollar exchange rates in several emerging markets that are closely aligned with cycles in economic activity. An econometric analysis suggests the presence of a cyclical interaction mechanism between exchange rates and output, in line with the theoretical model, in Chile, South Africa, and partly the Philippines. Further evidence indicates that such exchange rate cycles cannot exclusively be attributed to external factors, such as commodity prices, US monetary policy or the global financial cycle. We therefore argue that exchange rate cycles in emerging markets are driven by the interplay of external shocks and endogenous cycle mechanisms. Our argument implies that exchange rate management may be beneficial for macroeconomic stability.
    Keywords: Exchange rates, emerging markets, boom-bust cycles, structuralism, global financial cycle, commodity prices
    JEL: C32 E12 E32 F31
    Date: 2022–02
  2. By: Paul Carrillo-Maldonado; Michalis Nikiforos
    Abstract: This paper estimates the distribution-led regime of the US economy for the period 1947-2019. We use a time varying parameter model, which allows for changes in the regime over time. To the best of our knowledge this is the first paper that has attempted to do this. This innovation is important, because there is no reason to expect that the regime of the US economy (or any economy for that matter) remains constant over time. On the contrary, there are significant reasons that point to changes in the regime. We find that the US economy became more profit-led in the first postwar decades until the 1970s and has become less profit-led since; it is slightly wage-led over the last fifteen years.
    Keywords: Wage-led; Profit-led; Distribution; Growth; Time-Varying Parameters (VAR)
    JEL: E11 E12 C11 C3
    Date: 2022–02
  3. By: Arpan Ganguly; Danilo Spinola
    Abstract: This article aims to theoretically and empirically study the macroeconomic interactions between productive structure and income distribution in the context of the Global Value Chains (GVC). Firstly, we develop a theoretical framework, inspired by the Structuralist macroeconomic literature, establishing distinct regimes in the scenario of globalized production chains. The regimes are defined in terms of (1) a structure/diversification regime, (2) an integration/GVC regime, both drawn from the Balance of Payments Constrained Model (BPCM) literature, and (3) a functional income distribution regime. The theoretical framework guides the selection of proxies used to characterize each regime, measured using Principal Component Analysis (PCA) scores. That allows us to identify country patterns in a structured typology. Finally, we focus on growth trajectories, estimating the causal relationship between each of the beforementioned regimes and per-capita growth, using IV estimations. The dataset consists of 37 countries, with sources from the World Development Indicators (WDI), World Input-Output Database (WIOD), Trade in Value Added (TiVA), and the Penn World Tables (PWT). On one hand, this article contributes to structuralist growth models that typically estimate demand and distribution regimes independently, thereby offering a unified narrative on regimes of economic growth in the context of GVCs. On the other hand, our typology depicts how growth dynamics vary distinctly by geographical regions and how globalization has retained and accelerated processes of uneven development globally. The results show that (1) developed countries are more inclusive in terms of distribution under GVCs, (2) structural change has been exclusive, and growth patterns have been following a specialized pattern, and (3) the growth pattern has been associated with higher integration, but less diversification.
    Keywords: Global Value Chains, Uneven Development, Income Distribution
    JEL: E12 F15 F43 O47
    Date: 2022–02
  4. By: Julia M. Puaschunder (The New School, Department of Economics, School of Public Engagement, New York)
    Abstract: The Green New Deal (GND) is a governmental strategy to strengthen the United States economy and foster inclusive growth. The GND is targeted at sharing economic growth benefits more equally within society. How to align economic interest with justice and fairness notions is the question of our times when considering the massive challenges faced in terms of environmental challenges, healthcare demands and social justice pledges. First, this paper will outline what the GND is, how the GND is implemented and why it matters in its multiple implementation facets and international angles. Second, the Green New Deal will be presented as a possibility to make the world and society more equitable in the domains of environmental justice, access to affordable healthcare and social justice excellence. Ethical imperatives and equity mandates lead the economic rational behind redistribution in the GND as social peace, health and favorable environmental conditions are prerequisites for productivity. The GND offers hope in making the world and society but also overlapping generations more equitable and thus to bestow peace within society, around the world and over time. In answering the question if the GND is equitable, one has to acknowledge that the GND is a fairly novel phenomenon with international variations and diverse implementation strategies.
    Keywords: Access to Affordable Healthcare, Climate Change, Economics of the Environment, Environmental Justice, Environmental Governance, Green New Deal, Healthcare, Monetary Policy, Multiplier, Social Justice, Sustainability
    Date: 2021–06
  5. By: Giancarlo Bertocco; Andrea Kalajzić
    Abstract: To hypothesize the existence of a relationship between money and savings means questioning a fundamental pillar of the mainstream economic theory: the concept of neutrality of money. According to the traditional theory economic phenomena such as savings can be defined independently from money. The objective of this work is to show that savings cannot be defined independently from money and that savings must be considered as a monetary phenomenon. The paper consists of two parts. Starting from Adam Smith’s analysis and continuing up to the approaches developed by contemporary economists, in the first part we summarize the most significant aspects and the limitations of the mainstream theory. In the second part we specify the reasons of the non-neutrality of money and of the monetary nature of savings.
    Keywords: Savings, money, development, Keynes, Schumpeter
    JEL: B12 B13 B52 E12 E44
    Date: 2022–02
  6. By: Nomaler, Önder (UNU-MERIT, Maastricht University); Spinola, Danilo (UNU-MERIT, Maastricht University, Birmingham City University, and University of Johannesburg); Verspagen, Bart (UNU-MERIT, Maastricht University)
    Abstract: This article models the process of structural transformation and catching-up in a demand-led Southern economy constrained by its balance of payments. Starting from the Sraffian Supermultiplier Model, we model a dual-sector small open economy divided between traditional and modern sectors that interacts with a technologically advanced Northern economy. We propose two (alternative) autonomous elements that define the growth rate of this demand-led economy: government spending and exports. Autonomous government spending plays a central role in stimulating demand, and thus is a source of growth of the modern sector. Productivity adjusts to the growth rate of output, given by the growth rate of autonomous expenditure. Drawing from the Structuralist literature, the technologically laggard Southern economy catches up by absorbing technology from the Northern economy, potentially closing the technology gap. The gap affects the income elasticity of exports, bringing a supply-side mediation to the growth rates in line with the Balance of Payments Constrained Model. We observe that a demand-led government policy plays a central role in structural change, pushing the modern sector to a take-off. Also, the economy is stable in terms of capacity utilisation and modern sector employment.
    Keywords: Industrialisation, Catching-up, Balance of Payments, Sraffian Supermultiplier
    JEL: O41 E12 E61
    Date: 2021–10–18
  7. By: Natalie Pierson (The New School, United States)
    Abstract: This paper examines private exploration and colonization of space, inspired by the growing interest and advancements in developing space by private industries, notably SpaceX. Marx’s theory of primitive accumulation and David Harvey’s theory of “spatial fix†provide a framework from which to understand why billionaires are attracted to the business of space. Matters of legality are considered in the regulation of space including treaties, their applications, and the unforeseen gaps in the law left by unanticipated private sector growth. Economic feasibility is discussed through cost and revenue estimates of possible marketable products. Environmental impacts, both on Mars and Earth, are reviewed regarding physical landscape and biological contamination. Finally, it explores the ethics of a developing colony in a stressful environment and seeks to unpack the term colonization in a celestial setting. This paper concludes that bringing capitalist ideals and methods into space is not a solution for problems created by capitalism on Earth. Given the concerns identified, it may well exacerbate them.
    Keywords: Mars, space, colonization, primitive accumulation, private industry
    Date: 2021–08
  8. By: Lekha Chakraborty; Harikrishnan S
    Abstract: Against the backdrop of the COVID-19 pandemic, this paper analyzes the economic stimulus packages announced by the Indian national government and tries to identify some plausible fiscal and monetary policy coordination. The shrinking fiscal space due to revenue uncertainties has led to a theoretical plausibility of a reemergence of finite monetization of deficits in India. However, the empirical evidence confirms no direct monetization of the deficit.
    Keywords: Fiscal-Monetary Policy Coordination; Fiscal Deficits; Monetization; COVID-19
    JEL: E58 E62 E63
    Date: 2022–02

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