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on Post Keynesian Economics |
| By: | Dimitri B. Papadimitriou; Nikos Rodousakis; Gennaro Zezza |
| Abstract: | In this strategic analysis, Institute President Dimitri B. Papadimitriou, Research Scholar Gennaro Zezza, and Research Associate Nikos Rodousakis analyze how the Greek economy started to recover from the shock of the COVID-19 pandemic and the prospects of continuing and sustaining its recovery. A key contribution is linked to tourism, which increased significantly in 2021, notwithstanding the pandemic, but was still very much below its 2019 level; it is expected, however, to continue its recovery in the current year. In addition, a key role will be played by NGEU funds and the Greek government's capacity to use such funds in an effective and timely manner when starting and completing the already approved capital projects. A potential threat is linked to the possibility that persistent inflation will drive up the cost of borrowing, reducing the government's fiscal space. Another "known unknown"--not considered in this report--is the geopolitical turbulence emanating from the Ukraine–Russian conflict, adding an additional layer of uncertainty to the medium-term prospects for Europe and Greece. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levysa:sa_3_22&r= |
| By: | Giuliano Toshiro Yajima; Lorenzo Nalin |
| Abstract: | Liabilities denominated in foreign currency have established a permanent role on emerging market firms' balance sheets, which implies that changes in both global liquidity conditions and in the value of the currency may have a long-lasting effect for them. In order to consider the financial conditions that may encourage (discourage) structural change in a small, open economy, we adopt the framework put forward by the "monetary theory of distribution" (MTD). More specifically, we follow the formulation adopted by Dvoskin and Feldman (2019), whereby the financial system is intended as a basic sector that promotes innovation (Schumpeter 1911). In accordance with this, financial conditions are binding only for the innovative entrepreneurs, whose methods of production are not dominant and hence they need to borrow from banks to kickstart their production. Through this device, our model offers an explanation of the technological lock-in experienced by a small, open economy that takes international prices as given. |
| Keywords: | Foreign Exchange Policy; Currency Mismatches; Structural Change |
| JEL: | F37 F31 E7 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1004&r= |
| By: | Nomaler, Önder; Spinola, Danilo; Verspagen, Bart |
| 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 |
| Date: | 2022–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:akf:cafewp:18&r= |
| By: | Schefold, Bertram (Johann Wolfgang Goethe-Universitat) |
| Abstract: | The debate on capital theory is not any more on the discussions about the historical formation of neoclassical ideas in their original, most abstract form, but about the tools – certainly influenced by those ideas – which are used in teaching all over the world in applied economics. One focus still is on the macroeconomic aggregate production function, almost seventy years after Joan Robinson attacked this concept. It has turned out that reswitching is rare – once the most effective argument against the production function – and that an approximate surrogate production function can be constructed, using the approach of random matrices. This seems to weaken the critique, but a new one has emerged, which shows that the number of effective techniques on the envelope is small and that the possibilities of substitution between capital and labour are quite restricted in the relevant range of the rate of profit. This new turn in the debates on the critique of capital theory has recently come under attack by Fabio Petri of the University of Siena. The present paper constitutes the reply. It deals with the methodological difference between a fundamental critique, which was primarily directed against the logic of the pure late 19th century neoclassical theory and one attacking the applied uses of that theory in the form of the macroeconomic production function. It asks why the valid criticisms of the neoclassical conception of capital as a homogeneous factor seem to have had a lesser impact than the reswitching argument. It discusses reswitching and reverse capital deepening as relevant but, as far as basic commodities are concerned, rare phenomena. It assesses the usefulness of empirical input-output research in this area, mentions some results and concludes with a reflection on the recent ‘zero-substitution’ proposition. |
| Keywords: | Capital theory; production function; reswitching; Sraffa; employment |
| JEL: | B24 C62 C67 D57 |
| Date: | 2022–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:ris:sraffa:0053&r= |
| By: | Stern, Nicholas; Stiglitz, Joseph; Taylor, Charlotte |
| Abstract: | Designing policy for climate change requires analyses which integrate the interrelationship between the economy and the environment. We argue that, despite their dominance in the economics literature and influence in public discussion and policymaking, the methodology employed by Integrated Assessment Models (IAMs) rests on flawed foundations, which become particularly relevant in relation to the realities of the immense risks and challenges of climate change, and the radical changes in our economies that a sound and effective response require. We identify a set of critical methodological problems with the IAMs which limit their usefulness and discuss the analytic foundations of an alternative approach that is more capable of providing insights into how best to manage the transition to net-zero emissions. |
| Keywords: | climate change; extreme risk; market imperfections; climate policy; integrated assessment; social welfare; innovation; Grantham Institute; CCCEP; T&F deal |
| JEL: | J1 |
| Date: | 2022–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113702&r= |