|
on Post Keynesian Economics |
| By: | Jose Luis Oreiro |
| Abstract: | The current article has two main objectives. The first one is to make a historical reconstruction of the debate between Keynes and Classical economists in the period just after the publication of the General Theory (1937-1939) in order to highlight the differences between Liquidity Preference and Loanable funds theory of interest rate determination. In opposition of what seemed to be a consensus in economic literature (See Oreiro, 2001), both theories had very different implications about the nature of the rate of interest and the role of money in economic process. The second objective is to build a simple Keynesian Stock-Flow consistent model for the funding stage of the process of capital formation, represented by the Finance-Investment-Saving-Funding circuit. This simple model makes clearly that long-term interest rate for corporate bonds is a strict monetary variable, being dependent of liquidity preference of households and the monetary policy conducted by the Central Bank. In such framework, an increase in the households´ s propensity to save will increase, rather then decrease, the long term interest rate over corporate debt since it will decrease corporate profits which are the main source of internal funding for firms´ s investment plans, forcing then to issue more corporate debt in order to get the money required for funding investment, thereby reducing the price of corporate bonds and hence increasing the rate of interest over corporate debt. |
| Keywords: | : John Maynard Keynes, Liquidity Preference, Capital Formation, Finance and Funding. |
| JEL: | E10 E12 E44 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2509 |
| By: | Mario Cassetti |
| Abstract: | This study uses Kalecki's profit equation to examine the changing composition of expenditures that drove profit realisation in the US economy over the last few decades (1961-2019). A clear result is that profits in the Consumer Age (1979-2008) were driven less by investment and 'external markets', - i.e. net ex- ports and government deficits - than by a general collapse in savings. Thereafter, public deficits have aided profits. Still, the support of capitalists' consumption, although reduced, has remained. The study argues that the decline in the rela- tive bargaining power of production workers in the labour market, together with financial innovations, is the root cause of the Consumer Age. Empirical support is sought for the hypothesis that income inequality resulting from wage stagnation has increased upper- and middle-class consumption, and household indebtedness, and thus, profits. These events suggest a debate about how the distribution-spending link, fairly stable in Kaleckian/Keynesian models, can be profoundly altered be- cause of institutional and cultural change, and more generally, a debate about how long an economy driven by consumerism and inequality can last. |
| Keywords: | Kalecki's profit determinants, Income distribution, Consumerism |
| JEL: | E11 E12 E21 E25 E65 O51 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2510 |
| By: | Jose Barrales-Ruiz (Center of Economics for Sustainable Development (CEDES), Faculty of Economics and Government, Universidad San Sebastian, Chile.); Ivan Mendieta-Muñoz (Department of Economics, University of Utah, USA); Codrina Rada (Department of Economics, University of Utah, USA); Rudiger von Arnim (Department of Economics, University of Utah, USA) |
| Abstract: | The literature on the empirical linkages between economic growth (or other measures of macroeconomic performance) and the functional distribution of income is copious on the short run. The sustained and simultaneous decline in average rates of real GDP growth and the labor share of income in the US in recent decades has led to renewed interest in the long run, in light of the hypothesis of inequality-induced secular stagnation. This paper employs a vector error correction model with time-varying parameters and stochastic volatility to estimate the long run interaction between real GDP growth, labor share and the unemployment rate. Our key result indicates that a lower labor share is associated with a decline in the growth rate: economic growth is wage-led in the long run. |
| Keywords: | Growth and distribution; stagnation; demand regime |
| JEL: | C32 E12 E25 E32 O40 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2505 |
| By: | Dabrowski, Cara |
| Abstract: | In this paper, I extend the Hein and Stockhammer model of distribution and inflation by incorporating structural trends of financialization through three Kaleckian channels: (1) sectoral recomposition, (2) financial overhead costs and rentiers' profit claims, and (3) the bargaining power of trade unions and workers. The model is calibrated to two scenarios that reflect the institutionalized fear experienced by workers under neoliberal income policies. Following a theoretical exploration of potential inflationary shocks, an empirical case study comparing Germany and Austria is conducted. The analysis validates the relevance of all three Kaleckian channels, though their individual strength varies. The findings indicate that while rising import prices triggered the initial inflationary shock, firms subsequently increased unit profits by keeping overall domestic prices high even though import prices decreased. An inflation decomposition suggests a more pronounced class conflict in Austria, potentially attributable to less severe labor market deregulation. |
| Keywords: | Inflation, conflict inflation, distribution, Kaleckian theory of distribution, financedominated capitalism, financialization, financial and economic crisis |
| JEL: | D33 D43 E31 Q43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ipewps:312566 |
| By: | Heise, Arne |
| Abstract: | During the neoliberal era, fiscal policy was side-lined: from a political economy perspective, it was seen as biased toward deficit and debt accumulation, while from a macroeconomic perspective, its potential role as a business cycle stabiliser was shifted to monetary policy, in line with the New Macroeconomic Consensus. This consensus codified the restrictive and passive orientation of fiscal policy through rules such as the European Stability and Growth Pact or Germany's 'Debt Brake.' Following a series of crises, fiscal rules have come under intense criticism, and Keynesian discretionary policy has regained popularity in both theory and practice. This article aims to provide a Post Keynesian perspective on fiscal policy: rejecting the idea of general equilibrium self-regulation and criticising the inherent limitations of (fiscal) policy, it advocates a functionally-oriented capital budgeting approach which favours an expansionary stance on the long-term budget balance and should not be left to the discretion of policy- makers. Instead, it should follow a transparent, non-overridable rule complemented in the short term by the unrestricted operation of automatic stabilisers and, only in exceptional cases, by discretionary measures to prevent severe depressions. |
| Keywords: | Capital Budgeting, Functional Finance, Fiscal policy rule, Post Keynesianism |
| JEL: | E12 E62 H30 H60 H62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cessdp:313615 |