Journal of Post Keynesian Economics (J POST KEYNESIAN EC)

Publications in this journal

• Article: Global Imbalances, the Present Crisis and Modern Capitalism: A Structural Approach

  Keith Cowling, Stephen P Dunn, Philip R Tomlinson
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  ABSTRACT: The world economy is riven by very large imbalances, with the U.S. economy exhibiting high levels of consumption but low savings ratios and a high current account deficit while China provides the mirror opposite. In this paper, we explore the structural causes of these imbalances that underpin the current global economic crisis. A key focus here is on the corporate sector in the United States, which has been instrumental in creating unsustainable consumptionist tendencies through the use of excessive advertising strategies. In China, changing demographics and market reforms have led to a significant rise in precautionary saving. Correcting the current imbalances requires recognizing the underlying characteristics of both modern and nonmodern capitalist economies, with appropriate responses being structural in nature in addition to any macroeconomic adjustments.
  Journal of Post Keynesian Economics 01/2011; 33(4):575-600.
• Article: On the role of relative prices and capital flows in balance-of-payments-constrained growth: the experiences of Portugal and Spain in the euro area

  Carlos Garcimartín, Luis A. Rivas, Pilar García Martínez
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  ABSTRACT: Broadly speaking, the balance-of-payments constraint hypothesis as developed by Thirlwall has been empirically supported. Yet it shows some shortcomings highlighted in the literature. In our opinion, two of them must be analyzed. First, temporary disequilibria and capital flows must be incorporated into the balance-of-payments-constrained growth models. Second, the role of relative prices must be made explicit, since it can be relevant even in an external constraint framework. This study is aimed at developing a model that incorporates both possibilities: temporary external disequilibria and the impact of relative prices. This model is subsequently used to analyze the evolution of the Spanish and Portuguese economies in past decades, and, in particular, the different paths shown by both countries since their accession to the euro zone.
  Journal of Post Keynesian Economics 01/2010; 33(2):281-306.
• Source

  Available from: psu.edu

  Article: The Global Financial Crisis and a New Capitalism?

  Luiz Carlos Bresser-Pereira
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  ABSTRACT: The 2008 global financial crisis was the consequence of the process (1) of financialization, or the creation of massive fictitious financial wealth, that began in the 1980s; and (2) the hegemony of a reactionary ideology-namely, neoliberalism-based on self-regulated and efficient markets. Although laissez-faire capitalism is intrinsically unstable, the lessons of the 1929 stock market crash of 1929 and the Great Depression of the 1930s were transformed into theories and institutions or regulations that led to the "30 glorious years of capitalism" (1948–77) and that could have helped avoid a financial crisis as profound as the present one. But it did not, because a coalition of rentiers and "financists" achieved hegemony and, while deregulating the existing financial operations, refused to regulate the financial innovations that made these markets even riskier. Neoclassical economics played the role of a meta-ideology as it legitimized, mathematically and "scientifically," neoliberal ideology and deregulation. From this crisis a new democratic capitalist system will emerge, though its character is difficult to predict. It will not be financialized, but the glory years' tendencies toward a global and knowledge-based capitalism in which professionals have more say than rentier capitalists, as well as the tendency to improve democracy by making it more social and participative, will be resumed.
  Journal of Post Keynesian Economics 01/2010;
• Article: Taylor and Keynesian monetary policy rules

  H. Sonmez Atesoglu
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  ABSTRACT: In this paper, the Taylor rule and the Keynesian monetary policy rules recently introduced by Atesoglu are empirically compared for the 1994:2-2007:4 period. The findings reveal that the Atesoglu rule and the inflation-augmented Atesoglu rule are able to provide a better explanation of the federal funds rate than the Taylor rule. Results suggest that the Atesoglu rules based on the neutral interest rate idea of Keynes are likely to provide better predictions of future developments in monetary policy.
  Journal of Post Keynesian Economics 01/2009; 31(3):485-492.
• Article: Where Bernanke is taking the Federal Reserve: a Post Keynesian and institutionalist perspective

  J. Patrick Raines, Heather R. Richardson, Charles G. Leathers
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  ABSTRACT: We develop a perspective on where Bernanke is taking the Federal Reserve by drawing from Paul Davidson's Post Keynesian analyses of the current financial crisis and the Federal Reserve as an effective market maker and Thorstein Veblen's perception that the Federal Reserve was supporting creditinflation by large investment banks in the 1920s. New Deal legislation restricted the ability of investment banks to create credit-inflation and left the Federal Reserve with only an indirect relationship with investment banks. Financial deregulation and financial derivatives resulted in a new and larger form of credit-inflation by underwriter-bank conglomerates. Bernanke's responses to the inevitable financial crisis are bringing the Federal Reserve into an even closer relationship with underwriter-bank conglomerates than Veblen envisioned.
  Journal of Post Keynesian Economics 01/2009; 31(3):367-382.
• Article: Fiscal and monetary policy interactions: lessons for revising the EU Stability and Growth Pact

  Mark Setterfield
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  ABSTRACT: This paper explores the macroeconomic consequences of interactions between fiscal and monetary policy, in an environment characterized by endogenous money in which the interest rate is set exogenously by the central bank. Three "benchmark" interest rate operating procedures are identified, none of which presupposes that the main purpose of the central bank is to engage in inflation targeting. The paper then explores the consequences for macroeconomic performance (specifically, short-run growth and the rate of inflation) of activist fiscal policies designed to raise the short-run growth rate. The results provide insights into fiscal and monetary policy interactions in the sort of macroeconomic environment envisaged by some critics of the European Central Bank and the Stability and Growth Pact. In so doing, they provide lessons for those calling for fundamental reforms of both institutions.
  Journal of Post Keynesian Economics 01/2009; 31(4):623-643.
• Article: Origins of banking crises in Latin America: a critical view

  Wesley C. Marshall
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  ABSTRACT: The objective of this paper is to bridge an important gap between academic literature and the lessons of recent financial crises in Latin America. Although standard economic theory holds that banking crises are a singular phenomenon that should be treated in a uniform fashion, the banking crises of Mexico, Argentina, and Uruguay, and the responses of local authorities, convincingly demonstrate that there are in fact two distinct types of banking crisis that require equally distinct resolution measures. Taking into account these historical episodes, this paper presents a conceptual framework that both accommodates the possibility of two types of banking crisis and offers the analytical framework necessary to examine benefits and disadvantages of different resolution strategies when applied to distinct types of crisis.
  Journal of Post Keynesian Economics 01/2009; 31(4):669-690.
• Source

  Available from: ugent.be

  Article: Mainstream economics: searching where the light is

  Rogier De Langhe
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  ABSTRACT: The starting point of this paper is the question of how to explain mainstream economics' great level of acceptance in the face of its poor empirical track record. An explanation is provided in terms of a combination of unification and, most importantly, inference to the best explanation. This paper asks whether the appeal of mainstream economics to inference to the best explanation is justified and as a consequence questions one of the main reasons for the dominance of mainstream economics today. The final section integrates the ideas from the previous sections into a general framework for explanatory pluralism.
  Journal of Post Keynesian Economics 01/2009; 32(1):137-150.
• Article: Keynes and the real world: Davidson, money, and uncertainty

  Virginie Monvoisin, Louis-Philipe Rochon
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  ABSTRACT: In this paper, we show that there are many similarities between the economics of Paul Davidson and the views expressed by the monetary circuit. This is not surprising because they both trace their roots to Keynes. Circuitists emphasize banks and uncertainty; Davidson places the focus on uncertainty, contracts, and money. We seek to show that both approaches are complementary on many levels and offer in fact simply different pieces of the same overall Post Keynesian puzzle. In the end, they both find their inspiration in Keynes, which is still relevant today, as exemplified in Davidson's new book, >i>John Maynard Keynes>/i>.
  Journal of Post Keynesian Economics 01/2009; 32(1):43-58.
• Source

  Available from: ufrj.br

  Article: Economic integration and development in Latin America: perspectives for Mercosul

  Fernando J. Cardim de Carvalho
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  ABSTRACT: Mercosul (the Southern Cone Common Market) was created in the mid-1980s with four membersâArgentina, Brazil, Paraguay, and Uruguay. Theoretically, it was supposed to be the start of a regional integration initiative that could eventually evolve into a Union, following the example of the European Union. Economic motivation, however, was not the mainspring of Mercosul. The initiative was devised to approximate the two main economies of the regionâArgentina and Brazilâboth just emerging from long-lasting military regimes, to provide mutual insurance against new military coups. In fact, the economies of Brazil and Argentina are very similar in structure, which created important obstacles to the development of regional division of labor. The removal of barriers to trade between the two economies has been permanently stalled by the difficulty to allocate activities between them. On the other hand, the smaller members of the initiativeâParaguay and Uruguayâhave not found in Mercosul the support for development that they expected. Thus, Mercosul still survives, more than 20 years later, mostly because of its political virtues than because of its economic potentialities. Recent attempts at enlarging Mercosul may create new tensions and eventually threaten its survival.
  Journal of Post Keynesian Economics 01/2009; 32(2):235-248.
• Article: Subregional financial cooperation: the South American experience

  José Antonio Ocampo, Daniel Titelman
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  ABSTRACT: This paper reviews the experience of South America with subregional financial cooperation. It shows that this experience has been one of the most successful in the developing world, though uneven in terms of country coverage and services provided. The Andean region has been particularly successful in developing multilateral financial institutions, and development financing has been broader in scope than monetary cooperation. The two most successful institutions, the Andean Development Corporation (CAF) and the Latin American Reserve Fund (FLAR), have shown the capacity to provide services to member countries in a timely way, with countercyclical effects and on a large scale relative to other forms of multilateral financing. The strong sense of ownership of these organizations by member states, preferred creditor status, and professional management is reflected in very healthy portfolios, even in the face of default by member countries. The services of these institutions could be broadened to support, among others, the development and integration of the physical infrastructure and macroeconomic policy coordination.
  Journal of Post Keynesian Economics 01/2009; 32(2):249-268.
• Article: The applicability of the employer of last resort program to Brazil

  Zoraide Bezerra Gomes, André Luís Cabral de Lourenço
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  ABSTRACT: This paper aims to present the conceptual and theoretical framework of the employer of last resort (ELR) program and to verify the possibility of its application to the Brazilian economy. The initial hypothesis, based on the theory of Minsky (1986) and Wray (2003), is that if the government acts as an ELR, structural unemployment could be mitigated without generating an inflationary process or incurring the possible curses caused by labor market reform policies. In the present study, we identify main obstacles for the application of ELR to Brazil once it has been adequately adapted to national specificities.
  Journal of Post Keynesian Economics 01/2009; 32(2):291-310.
• Article: Money supply endogeneity under a currency board regime: the case of Bosnia and Herzegovina

  Shirley J. Gedeon
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  ABSTRACT: A currency board is a monetary regime based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate. Currency boards are thought to exhibit properties of money supply endogeneity and monetary self-regulation, eliminating the need for discretionary monetary policy. This paper offers a theoretical and institutional explanation why, under the strict currency board regime in Bosnia and Herzegovina, it is possible to observe credit expansion in the presence of persistent trade deficits. It explains how the lender of last resort function is reestablished through private discount window arrangements between domestic and foreign parent banks, illustrating a de facto privatization and decentralization of monetary policy.
  Journal of Post Keynesian Economics 01/2009; 32(1):97-114.
• Source

  Available from: ufrgs.br

  Article: Thirlwall's law and the long-term equilibrium growth rate: an application to Brazil

  Gustavo Britto, John S. L. McCombie
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  ABSTRACT: This paper uses the balance-of-payments-constrained model to estimate the determinants of the long-run rate of growth of Brazil. Contrary to previous tests for the country found in the literature, this paper uses a different approach to test the long-run relationship between actual growth rates and those predicted by Thirlwall's law, extended to include capital flows. The regression results, apart from providing renewed support for the thesis that the country's growth rate has been constrained by the balance of payments, allow us to argue that Thirlwall's law is associated with a notion of long-run equilibrium growth rate which is fundamentally distinct from that of mainstream economics.
  Journal of Post Keynesian Economics 01/2009; 32(1):115-136.
• Article: Fiscal policy is back in France and the United Kingdom!

  Jerome Creel, Francesco Saraceno, Jérôme Creel, Paola Monperrus-Veroni
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  ABSTRACT: In this paper, we analyze the resurgence of discretionary fiscal policy in the fiscal theory of the price level (FTPL) framework. Despite its reliance on the new consensus macroeconomic (NCM) framework, the FTPL concludes that fiscal policy may lead monetary policy without hampering macroeconomic stability. We show that an empirical model deriving from this theory gives very interesting results: in France and the United Kingdom, fiscal policy has positive long-run effects. This is at odds with the orthodox nature of FTPL promoters who usually advocate fiscal rules and sanctions. We interpret our results as being consistent with Post Keynesian economic thinking. We conclude that the move of some economists from the NCM school of thought in favor of discretionary fiscal policy has promoted the visibility of Post Keynesian ideas on this topic.
  Journal of Post Keynesian Economics 01/2009; 31(4):645-667.
• Article: Regional currencies and regional monetary zones in Latin America: what prospects?

  Claude Gnos, Jean-Francois Ponsot, Virginie Monvoisin
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  ABSTRACT: Reducing transaction costs and the need for international reserves is a primary objective to the establishment of regional payment agreements. Another objective, especially in the case of Latin America where the Ecuadorian promoters of the Bank of the South (Banco del Sur) and the New Regional Financial Architecture are planning the implementation of a regional clearing system, is to reduce member countries' dependence on the U. S. dollar as an international standard and reserve currency. To help improve the design of such agreements, this paper refers to the plan Keynes designed for the Bretton Woods conference. First, it observes that cases were made against this plan from which useful lessons may still be drawn. Second, it shows that Keynes defined a system for exchanging domestic currencies for each other that can be improved and help design currency unions in accordance with their promoters' objectives.
  Journal of Post Keynesian Economics 01/2009; 32(2):173-184.
• Source

  Available from: american.edu

  Article: Davidson on Keynes: the open economy dimension

  Robert A. Blecker
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  ABSTRACT: This paper reviews the treatment of open economy issues in Paul Davidson's book, >i>John Maynard Keynes>/i>. Davidson aptly summarizes Keynes's criticism of the international monetary system for the asymmetric "burden of adjustment" it places on deficit countries compared with surplus countries, which imparts a contractionary bias to the world economy. Davidson also updates Keynes's proposals for global monetary reform and extends his analysis of international trade. However, Davidson's arguments about mainstream views of international finance and the ineffectiveness of exchange rate adjustments are on less solid ground. This paper suggests reformulations of Davidson's interpretations on the latter two points.
  Journal of Post Keynesian Economics 01/2009; 32(1):19-41.
• Article: The transmission mechanism of fiscal policy: a critical assessment of current theories and empirical methodologies

  Giuseppe Fontana
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  ABSTRACT: This paper reviews the current theoretical and empirical literature on the transmission mechanisms of fiscal policy. Its main conclusion is that there is nothing closely approaching an agreement on the effects of fiscal policy. The theoretical and empirical literature on the subject is scarce and divisive. The predictions of the neoclassical theory and the new Keynesian theory, as well as the "narrative" or "dummy variable" and the "structural vector autoregression" (SVAR) types of empirical analyses of fiscal policy all rest on shaky foundationsânamely, the intertemporal government budget constraint, the Ricardian equivalence hypothesis, and severe empirical restrictions in order to identify fiscal shocks.
  Journal of Post Keynesian Economics 01/2009; 31(4):587-604.
• Article: Sen's capability approach and Post Keynesianism: similarities, distinctions, and the Cambridge tradition

  Nuno Ornelas Martins
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  ABSTRACT: The capability approach to human development, proposed by Amartya Sen and others, is now a prominent perspective within welfare economics and development economics. I argue that the capability approach, like Post Keynesianism, can be situated within the Cambridge economic tradition, a tradition grounded on classical economics, and characterized by an ontological focus on themes such as openness and uncertainty, and by a common social philosophy. Furthermore, I argue that the capability approach and Post Keynesianism can be seen as complementary and mutually enriching approaches.
  Journal of Post Keynesian Economics 01/2009; 31(4):691-706.
• Article: Financing economic development in Latin America: the Banco del Sur

  Wesley C. Marshall, Louis-Philippe Rochon
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  ABSTRACT: In this paper, the authors lay out a proposal for the institutional framework for the Banco del Sur. Considering the recent historical experiences of Latin America and the need to promote economic activity based in domestic currencies and channeled through nationally owned banks, the authors suggest that the Banco del Sur be divided into two partsâa regional development bank and a regional central bank that issues a regional currency. Under such a scheme, the region would benefit from greater financial stability while member countries would be afforded the maximum economic sovereignty possible.
  Journal of Post Keynesian Economics 01/2009; 32(2):185-198.