Keynesian Research Articles

An Empirical Retrospect of the Causal Effect of Government Education Spending on Growth in a Neoclassical Growth Model

There has been consensus on the notion that education results in economic prosperity and growth in many countries. This has resulted in a strong focus on education policy, with large investments and a lot of public debates concerning the subject. Various schools of thought have made differing suggestions about how government spending impacts economic growth over the years. The Keynesian view is that there is a positive relationship between government spending and economic growth, where the causal effect runs from government spending to economic growth. Conversely, the Neo-classical school asserts that the relationship between the two variables is negative. The topic, therefore, remains a debatable issue. The present study, therefore, tests the causal effect of education expenditure on economic growth in South Africa for the period 1994 to 2021, with the aid of the autoregressive distributed lag approach. Consistent with Keynesian theory, the study results confirm the positive impact of government spending on economic growth. A Granger causal relationship exists between government education expenditure and economic growth, indicating that over time, education expenditure positively impacts economic growth through human capital. This implies that investing (spending) in education is critical in promoting economic growth, especially in the long term.

The renaissance of ordoliberalism in the 1970s and 1980s*

AbstractThe economic tradition of ordoliberalism, understood as the theoretical and policy ideas of the Freiburg School, emerged in 1930s and 1940s Germany. In the years thereafter, it was quickly superseded by Keynesianism and other theories imported from the English-speaking world. The crisis in Keynesian economics in the mid-1970s led to what has been described as a “renaissance of ordoliberal reasoning” (Gebhard Kirchgässner) during the late 1970s and the 1980s. The present paper describes this development in detail and shows how it affected the academic discourse and, more indirectly, policymaking. In academic economics, ordoliberal concepts were used to inform debates about pressing issues of the day such as unemployment, social security reform, competition policy, the provision of public goods, and European integration. There was, however, no consensus on the methodological question of whether ordoliberalism could be fully integrated into international research programs such as the new institutional economics or constitutional economics. The paper argues that the renaissance of ordoliberalism failed to have a lasting impact on German academic economics and discusses possible implications of this finding for the future of the ordoliberal research agenda.

Reverting to Restraint: A Keynesian Intermezzo and Neoliberalism in the Netherlands (1971–1977)

In line with recent studies revealing the role of neoliberalism in Dutch post-war history, this article highlights the influence of neoliberal ideas during the first half of the 1970s. In addition to a clear orientation towards supply-side economic policies and a firm tradition of fixed budgetary rules, the author emphasises the importance of Dutch monetarism in guiding Central Bank policies and prioritising monetary objectives such as price stability, fixed exchange rates and balance of payment equilibrium over Keynesian policy goals. A short-lived Keynesian intermezzo of countercyclical demand-management commenced in March 1974, after which rules-based, stability- and supply-side economic, financial and monetary policies started to regain the upper hand in 1976.

The house that Keynes built: Redecorating and overhaul of the monetary policy model

The regular economic crisis prompts macroeconomists to revise their models. The monetary policy is no exception. As a result of the “Great Recession” in 2007-2009 and the COVID-­19 pandemic in 2020-2021, they were forced to refresh a look at the monetary policy models that define central bank’s short­term interest rate decisions. The principles of the New Keynesian economics lie behind most modern models of monetary policy. A set of equations based on several theoretical assumptions and simplifications leads to certain model conclusions. An active work to review the New Keynesian models in the 2020s is under way. Key improvements include financial sector modeling; replacing rational expectations with their alternatives, as well as representative economic agents with heterogeneous ones; finding microeconomic foundations for assumptions; and fiscal policy modeling.

Types of uncertainty and probability: some remarks

This article comments on Donald Katzner’s “The Problem with Probability.” Professor Katzner criticizes any approach that uses probability to deal with “Knightian uncertainty.” The present article attempts to promote and improve the dialogue between proponents of different approaches to uncertainty and probability, as well as between different proponents of Post Keynesian economics. In this regard, this article highlights (a) the difference between Knightian risk and Savage’s uncertainty, (b) the acceptance into mainstream economics of approaches that go beyond both, (c) the fact that Keynes’s writings of the mid-1930s combined uncertainty with probability and weight in crucial parts of his theory, and (d) some comments on Shackle by authors in the Keynes literature. This article also intends to provide food for thought, hopefully stimulating Professor Katzner and other sympathizers of Shackle’s conception of uncertainty to reconsider the statement or the implication that uncertainty of the strongest type relevant in economic reality is synonymous with complete ignorance about the future.

EVALUATION OF LABOR MARKET INDICATORS IN THE EVELOPMENT OF GREEN ECONOMY

The Green Economy proposes that these habits need to be reversed and relationships established with both the planet and other people need to be overhauled. It is seen that the free market system, which is supposed to work properly in inter-crisis periods, plays the leading role in state intervention by bringing Keynesian policies to the agenda when a crisis is in question. As manifested in both the Great Depression of 1929 and the Financial Crisis of 2008, the ongoing mainstream economic regime is not perfect and is being radically challenged by the emergence of areas such as the Green Economy. In this study, it is aimed to present a literature review to explain the concept of green energy with the possible reflections of the green economy on employment and employment and to analyse the example of Azerbaijan, the fastest developing country in the world, basically the effect of employment on employment. Correlation, ADF test and Granger Causality tests, which are statistical and econometric models, were used as research methods. As a result, it is seen that employment has an effect on “General power supply”, “Solar electricity” and “Total energy supply from renewable sources”. However, the hypothesis that General power supply, Hydropower, Biomass and waste, Wind electricity, Solar electricity and Total energy supply from renewable sources do not affect employment is accepted at the 5% significance level.

The Bielefeld School of economics, Post Keynesian economics, and dynamic complexity

The Bielefeld School of economics emerged in the 1990s, led by economists located at/or regularly visiting the University of Bielefeld in that period and the following decades, with Peter Flaschel as arguably its central leading figure based at that university. This school drew especially on the work of Richard Goodwin and his nonlinear dynamical models of macroeconomic growth and fluctuations. His work, in turn, drew on both Keynes and Marx as well as Schumpeter. Besides these influences, the school would also eventually add inventory adjustment models due to Lloyd Metzler to model endogenous fluctuations with associated income distribution dynamics with economic growth. While drawing on both classical and Keynesian sources, these models differ from modern New Keynesian models by eschewing rational expectations as well as equilibrium, emphasizing instead ongoing disequilibrium adjustment. While they have some similarities to Post Keynesian models, there has been relatively little interchange or interaction between the two schools. Several in the Bielefeld group appeared to be sometimes critical of Post Keynesians for a perceived lack of rigor in a number of their models. At the same time though there are several sub-schools of Post Keynesian economics similar to the Bielefeld School in approach than others. Probably the clearest area of overlap and similarity involves models exhibiting dynamic complexity, irregular endogenous fluctuations. Indeed one Post Keynesian tradition derives from nonlinear dynamical models due to Kaldor, which resemble those of Goodwin, the main foundation for the Bielefeld School models.

A NEW PHILOSOPHY FOR SUSTAINABLE CONSUMERISM

With growing awareness of unsustainable practices, communities are forcing businesses and governments to take serious steps towards sustainability. Microplastics enter the food chain and eventually reach humans. The threat of global warming and recurrent climate disasters necessitate immediate action. However, all governments and corporations rely on an ‘increase in demand’ as a growth metric, which prevents them from doing anything meaningful to ensure our planet’s long-term viability. Against the above paradox, this article explores a compromise between sustainability, consumption, and economic growth. It is a theoretical framework for proposing a solution in which businesses can expand in tandem with our planet’s long-term future or a glance through the areas where the Keynesian economy can coexist with environmentalists’ concerns. The proposed framework claims significance in terms of practicality than the perfection of a solution.

Early post-Keynesian journeys from Cambridge into development: Bridges and boundaries

AbstractThis synthetic commentary offers a handful of observations. First, it highlights structural differences between the advanced market/capitalist economy that forms the theoretical scaffolding of Keynesian theory, as against the diverse range of structural and institutional configurations that characterise contemporary developing economies. Second, bearing these distinctions in mind, how far does the notion of “full employment” hold relevance in the context of developing economies? Third, the focus shifts to the central Keynesian policy prescription: reflating economic activity through injecting additional demand into the system, in extremis through pump-priming, digging and filling trenches – would this perform in a poor agrarian economy? Would the multiplier work and deliver in the realities of developing economies? Fourth, the central policy agenda in the South was that of launching industrialisation, leading to a sustained structural transformation of the economy – a la the Kaldorian industrialisation paradigm, which is scarcely visible in the (post-)Keynesianism template. Fifth, it queries the investment function and the role of state investment, and/or of “animal spirits” of capitalist entrepreneurs and agents, whether of domestic or foreign origins. Sixth, there is need to widen the focus, as well argued by Hans Singer, Amiya Bagchi and others, from Keynes-I of The General Theory, to Keynes-II of Bretton Woods, thereby substantially widening the interface with the agenda of development. Finally, there is the inevitable question concerning the nature and role of the state in the contrasting developed-vs-developing-economy, then-and-now scenarios. This discursive commentary is largely a Cambridge dialogue, not inappropriate in a tribute to Geoff Harcourt.

Keynesian Without the Policy: Why the Business Cycle is all about Business Confidence and Finance

<p>Many of Keynes´s ideas and concepts are proven correct in this paper. The demand side, mainly business investments, drives the economy. Business firms steer the business cycle via profit expectations and animal spirits. Injections to and withdrawals from the circular flow of income are multiplied throughout the economy in accordance with Keynes´s multiplier. A sudden and sharp rise in households´ saving rates has a detrimental effect on aggregate demand, in line with Keynes´s paradox of thrift. Finance, not saving in the S=I sense, is the necessary condition for business investments and economic growth to be realized. Keynes´s finance motive thus makes money endogenous, contradicting the textbook result that exogenous money steers aggregate demand, contradicting the mainstream loanable funds theory and putting into question the Keynesian theory of sticky prices as a condition for real growth. However, a crucial omission in Keynes´s productive writings is the lack of an accelerator tying income to investment. Some of his followers such as Paul Samuelson tried to remedy that by developing multiplier-accelerator models. The problem with them is that the accelerator lacks micro foundations, in specific disregarding business confidence. Linking macro accounting identities with empirical national accounts data for five major economies produces the finding that business firms explain more than all aggregate expenditure growth during a 25-year period. Thus, it is concluded that business confidence is the root of the business cycle. Making the accelerator account for business confidence casts new light on the perhaps most well-known Keynesian “truth”: active fiscal policy as a main force stabilizing the business cycle. With business confidence being the endogenous and ubiquitous variable driving the business cycle, it turns out that any exogenous factor has the possibility to affect it. Policy needs to be viewed as a competing factor to the factor(s) driving the cycle in the other, destabilizing direction. The more powerful those factors are (e.g., a deadly virus), the tougher it gets for policy to “win” the competition, turning business confidence around. This leads up to the paper´s main conclusion: the worse the economy, the stronger is the case for active fiscal policy, but the lesser is the chance for it to succeed.</p>

Inflation phobia, myths and dogma exacerbate policy responses*

This article offers an alternative narrative on contemporary inflation and policy responses to it. It argues policy responses to inflation have been driven by unfounded beliefs underlying current inflation myths and phobia. These are rooted in neoliberal ideology and dogma, especially influential since the neo-classical counter-revolution against Keynesian macroeconomics. They prevent better understanding of the nature and causes of inflation, leading to inappropriate policy responses exacerbating the situation. Misdiagnoses, policy confusion and anti-labour bias are exposed before offering an alternative narrative and concluding remarks.

Influence of Equal Opportunity on Employment of People with Disabilities in Ghana

Purpose: The study sought to investigate the challenges and the influence of offering equal job opportunities to people with disabilities in Ghana.
 Methodology: The study adopted a desktop methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low-cost technique as compared to field research, as the main cost is involved in the executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through online journals and library
 Results: The results revealed that in terms of supply, education emerged as a key aspect that employers looked at when it came to the employment of PWDs. Thus, it was seen as advantageous for PWDs to seek post-secondary and vocational education to enable them to access the labour market. Internships were also seen as a way for PWDs to gain relevant work experience and access the labour market. However, the transition rates into employment were quite low. Type of disability had a very strong relationship to the employment of PWDs. It was seen to negatively influence the employment of PWDs as HR personnel were more inclined to employ persons with physical disabilities than other types of disability. In conclusion employment of PWDs in the human resource sector was predicted by legislation, supply and type of disability
 Unique Contribution to Theory, Practice and Policy: This study used virtue theory, the socio-economic theory of compliance and the Keynesian theory of employment. These theories may be used to anchor future studies in the employment sector. The study will benefit many stakeholders. The top management of companies in the country will also use the study findings to improve the employment sector and ensure high and stable performance in all their activities and programs. It is expected that the adoption of effective employment methods will help to improve efficiency in their major operations and activities. The study results will also benefit other stakeholders such as the policy makers as well as researchers and scholars from different parts of the world. Scholars may attempt to bridge the conceptual and contextual gaps identified in this study.

Addressing the rise of inequalities: How relevant is Rawls's critique of welfare state capitalism?

Addressing the rise of inequalities: How relevant is Rawls's critique of welfare state capitalism?

Revisiting the New Keynesian policy paradoxes under QE

Standard New Keynesian models deliver puzzling results at the effective lower bound of short-term interest rates: greater price flexibility amplifies the fall in the output gap in response to adverse demand shocks; labour tax cuts are contractionary; the multiplier of wasteful government spending is large. These outcomes stem from a failure to characterise monetary policy correctly. Both analytically and numerically, we show that allowing the central bank to respond to inflation with quantitative easing can resolve all these paradoxes. In quantitative terms, mild adjustments to the central bank’s balance sheet are sufficient to obtain results more in line with conventional wisdom.

Household Saving Behaviour in District Peshawar, Khyber Pakhtunkhwa

The main purpose of this study is to examine household saving behaviour in the district of Peshawar Khyber Pakhtunkhwa. Data for this study was conducted through a survey questionnaire and questionnaires were distributed among 400 households of district Peshawar town III. The data was analyzed through the ordinary least square method using SPSS 26. Weighted least square (WLS) was used for estimation. The study explored that there is a strong link between household savings and planned variables. The results show that the total income of households has a direct and significant relationship with the savings of the households, so the result goes with the Keynesian theory of income and saving. Furthermore, a number of adult equivalence and debt have positive and significantly related to household saving in district Peshawar, whereas the dependency ratio has a negative but significant relationship with household saving in the study area which means that when a number of dependents in a family increases the rate of saving of that family decreases. The study suggests that the government of Khyber Pakhtunkhwa should increase employment opportunities for those who depend on their family.

A Literature Study on Business Cycle Theory

Business cycle theory is always a research focus during the last couple of decades as a tool to explain the fluctuation in economic growth. In chronological order, this review sorts out the theories trying to explain the business cycle into five main influential schools of economics based on previous studies: Keynesian economics, Monetarism, New classical economics, Real business cycle theory, and New Keynesian economics. This review summarizes these theories respectively, introducing their origins, main mechanism, related models and empirical evidence, drawbacks, and challenges they face from other economists. Meanwhile, this review also compares the differences and similarities between each theory from three aspects: the determinant of aggregate production, the driving force of the business cycle dynamics, and the effectiveness of fiscal and monetary policies. The motivation is to gain a general view of modern business cycle theory to provoke thinking in long-term growth and short-term fluctuations in economic activities to support further research.

A Framework for Income, Inheritance, and Wealth Tax in America amid Increasing Income Inequality when the Richest are Leaving even the Rich Far Behind

A Framework for Income, Inheritance, and Wealth Tax in America amid Increasing Income Inequality when the Richest are Leaving even the Rich Far Behind

Dinero endógeno y exógeno en la nueva macroeconomía keynesiana: un análisis teórico comparativo.

Dinero endógeno y exógeno en la nueva macroeconomía keynesiana: un análisis teórico comparativo.

Wage Rigid: The Relationship between Real Output and Wage with or without Monetary Policy

The relationship between real wage and output is a major area of interest within field of both macroeconomic and microeconomic. Labour market has intimate relationship with wage determination, and the wage level, representing individual’s earning and in turn affect level of poverty and living standard to some extent. This paper uses a series of regression econometric models to examine the relationship between real wage and real output level. This paper also assesses impact of different monetary policy on this relationship, either under interest target or free interest rate. Additionally, results from the economic models would be used to compare with that from Keynesian theory. Identify the relationship between wage and output would be helpful for the government to make policy decision. In a way to boost economic growth sustainably and raising living standard.

Through a Keynesian Theory to Analyze the Economic Impact under the Outbreak of COVID-19 in China

With the outbreak of COVID-19 pandemic, Chinese economy was hit severely and this disease brought a significant challenge for China. This was particularly the case for unemployment, the variation of GDP and the shrinking of small and medium-sized enterprises. The objective of this research is to investigate the impacts of COVID-19 in China, evaluating economic approaches being applied for different countries and point out the suitable method to boost the recovery of the Chinese economy from economic depression. The study used the fundamental concept of Keynesian theory to conclude the most effective approaches and showed that according to Keynesian theory, the Chinese government should implement expansionary policies to sustain economic growth by raising effective demand and solving unemployment problems. Therefore, the Chinese government can encourage the whole economy through fiscal and monetary policy.