Keynesian Research Articles

Analysis of the application of neoliberalism and monetarism in the modern economic system

The author of a scientific publication examines the transformation of the situation in the economic field as part of the transition from the dominance of Keynesian theory to the development of alternative directions, in particular neoliberalism and monetarism. The author relies on the fact that the decline of the Keynesian approach was associated with an increase in the burden on the budget, which gave impetus to the development of theories that brought to light theories based on the free market and competition. Particular attention is paid to the provisions of such economists as M. Friedman, F. Hayek, L. Mises. The author emphasizes that M. Friedman refutes the theory of effective demand, explaining that there is a strong relationship between the change in the money supply and the commodity market. The author also comes to conclusions about the purpose of the postulates of early monetarism, which was to reduce the tax and other burden on business and the population, which should have a positive impact on other economic indicators. The author notes that in the context of these theories, the state is able to have a positive effect on the market, but only in the short term, so the instrument of state support and regulation must be used very carefully so as not to disrupt the functionality of market mechanisms. The author concludes that, from the standpoint of neoliberalism, the state distribution of profits and incomes does not make any sense, it only deprives the incentive for entrepreneurial activity, which can increase unemployment and cause an economic recession in the state, while in a situation of free enterprise, the listed there are no difficulties.

Statistics of Economic Growth in Developing Countries: A Case Study of Rwanda

Purpose: This study sought to analyze how economic growth in developing countries is influenced by public borrowing referencing on Rwanda as a case study. Methodology: The study used time series data from 1980 to 2018. The study used domestic debt and external debt to analyze how it influences Rwanda’s Gross Domestic Product (GDP). To achieve this objective, secondary data was collected from the National Bank of Rwanda and the debt office in Rwanda. The study employed multiple regression model to identify the relationship between the dependent variable (GDP) and the independent variables (domestic debt and external debt). The t-test was used to confirm the formulated hypotheses at the 5% significance level. Findings: The study found out that a positive relationship exists between IMF Loan and Rwanda’s gross domestic product, while a negative relationship exists between domestic debts and Rwanda’s gross domestic product, which violates the Keynesian theory of public debt. Conclusion: The study concludes that both domestic and external debt significantly affect economic growth in Rwanda. Recommendation: The study recommend that developing countries should develop a good structure of Debt Management Office including a plan for capacity building in order to make its proper debt strategy analysis without external support. The study also recommend developing countries to reduce reliance on internal borrowing to reduce competition between citizens and the government which can reduced economic growth. Furthermore, the study recommend developing countries to account for public debts and ensure that such debts are solely acquired for economic purposes rather that political purposes.

Government Infrastructure Spending and Economic Growth in Kenya: An Autoregressive Distributed Lag Model Approach

Purpose: Since independence, the Government of Kenya has pursued many objectives, one being economic growth. Over the previous few many years, government expenditure has been developing faster than the GDP growth. Infrastructure, one of the components of public spending, has also experienced tremendous growth in government spending and development, which has not been directly reflected in the GDP growth rate. Following such situation, it calls for analyzing the impact that government infrastructure expenditure has on economic growth in Kenya with a focal point on three sectors beneath infrastructure that the public sector spends closely on; transport, energy and fuel, and Information Communication and Technology (ICT). The study's overall objective is to find out the effects of government spending on the three sampled sectors of government infrastructure on economic growth in Kenya and then draw policy implications from the findings. The specific objectives were; to investigate the effect of transport infrastructure expenditure on economic growth in Kenya, to examine the effect of energy & fuel infrastructure expenditure on economic growth in Kenya, and to examine the effect of ICT infrastructure expenditure on economic growth in Kenya. Further, Bounds F-test to cointegration as well as the Autoregressive Distributed Lag Model (ARDL) were used to realize the objectives.
 Methodology: The data was collected covered 1990 – 2020 for the three sectors of infrastructure: transport, energy & fuel, and ICT. Several tests on the time series data were carried out on the secondary data obtained, after which (ARDL) was employed in analysing the data.
 Findings: The outcome showed that government expenditure on transport, energy, fuel, and ICT infrastructure sectors affected economic growth either in the short or the long run. Based on the ECM regression findings, the long-run regression outcome revealed that expenditure on energy and fuel promotes economic growth. On the contrast, the findings showed that government expenditure on transport and ICT sectors exhibited a negative effect on GDP growth rate. Public expenditure on transport and ICT infrastructure sectors positively impacted economic growth in the short term, while the energy and fuel sectors exhibited a negative impact on GDP. Other control variables inclusive of trade openness and FDI showed either a positive or negative effect on economic growth either in long or short run. Inflation, particularly, exhibited a negative effect on GDP in the long run, in addition to within the short run.
 Unique Contribution to Theory, Practice and Policy: Based on the empirical findings, this study validates the Keynesian theory which stipulates that public expenditure positively contributes to economic growth. Based on this theory, public expenditure is an exogenous factor capable of being applied as a policy instrument in promoting economic growth.

Inflation and Conflicting Claims in the Open Economy

ABSTRACT Exchange rates and international prices are fundamental to explaining inflation in open economies. Conflict inflation models account for these variables by including imported inputs and, sometimes, a distribution effect of exchange rates since firms' mark-up cannot be independent of foreign competition in open economies. We analyze the different assumptions on distribution underlying conflict inflation models. We propose an alternative approach building on the Classical–Keynesian theory of distribution for a price-taker open economy. Thus we model conflict inflation in a framework compatible with the Classical–Keynesian approach for the open economy. The model includes tradable prices, considering their direct impact on distribution. Therefore, it addresses a cause of inflation overlooked in the literature. Finally, conflict inflation affects the real exchange rate, which becomes a fundamental distributive variable.

Setting the record straight on the recovery from the 1920–1921 recession

Abstract The US recovery from the 1920–21 recession has been presented as a triumph of laissez-faire policies and a serious challenge to Keynesian economics. This study interrogates this claim by using previously unutilised data and examines the historical development of the early 1920s recession and recovery. The study refutes the laissez-faire view and shows that the recovery indeed fits Keynes’s perspective. The deflationary recession was largely engineered by the Federal Reserve a la 1980s Volker disinflation. The recovery closely followed the reversal of tight monetary policy and was propelled by exceptionally long pent-up private consumption and residential spending. The recovery initiated the Roaring Twenties boom of weakened organised labour, rising income inequality and mounting private debt. This private debt-led boom proved unsustainable and was fraught with risks that contributed to the severity of the Great Depression. Although the recovery was not driven by fiscal policy, it cannot be seen as driven by price flexibility either.

Simulation of Bitcoin in Dollarized Economies

The objective is to study how bitcoin should be used in dollarized economies and how bitcoin is distributed to people according to their life deeds. The bitcoin contradicts all the Keynesian Economic Theory whereas bitcoin increases, its prices increase too, and this is different from the normal theory. How and why bitcoin has been built and the new universal technological techniques behind bitcoin.

Keynes’ denial of conflict: Why The General Theory is a misleading guide to capitalism and stagnation

Keynes’ General Theory was a huge step forward relative to classical economics, but it was also a step backward in its denial of the conflictual nature of capitalism. There is need to understand Keynes’ technical contributions regarding the workings of monetary economies, but also need to understand the flaws within his thinking and the consequences thereof. Keynes made a fundamental contribution elucidating the mechanism of effective demand, and he also has claim to be the preeminent monetary theorist. However, his critique of classical economics was technocratic and focused on the interest rate mechanism. Reflecting his own liberal political economic disposition, he denied the conflictual nature of capitalism. That is the “original sin” in Keynesian economics, and it has far-reaching implications. It explains why establishment Keynesian economics struggles to explain the current tendency to stagnation. Even more importantly, it has kept economics locked into a false conception of capitalism that undermines the case for Social Democracy.

СТАНОВЛЕННЯ ТА ОСНОВНІ ІДЕЇ НОВОЇ КЕЙНСІАНСЬКОЇ ЕКОНОМІКИ

The world economy and the phenomena that emerge in it are developing so rapidly in the current environment that traditional scientific schools, methods or recommendations are unable to actively explain them, let alone provide practical recommendations to governments on how to implement effective economic policies. All of the schools of thought that flourished in the early twentieth century have undergone modifications, crises, or have fallen out of favor in academic debate or public policy over the past hundred years. The economic crisis of 2007-2009 put more than one economic school or trend in a hopeless situation. In these conditions, the followers of classical Keynesianism, the scholars of the "new Keynesian economy", made quite successful attempts to explain the causes of crises and imbalances in the modern economy and offered practical recommendations for their prevention. Purpose. The purpose of the article is to reveal the main postulates and effective proposals of researchers of the new Keynesian economy. Methods. The following scientific methods were used during the research: analysis and synthesis, deductive method, analogy method, modeling, system approach, abstraction method. Results. New Keynesian economics is based on the postulates of classical Keynesianism and contains elements of classical economics and microeconomic analysis. By accepting that the economy operates under imperfect competition, wages and unemployment are procyclical, and output depends on aggregate demand, which is affected by nominal and real rigidities, New Keynesians have found quite effective explanations and practical recommendations for forecasting and modeling economic processes. As a result, the need for government intervention in the economy has returned to the economic discussion. Conclusion. Representatives of the new Keynesian economics were able to adapt to changes in the global economy and proposed effective scientific methods and approaches to solve economic problems and explain phenomena that arise in the modern economy. Their postulates on nominal and real cruelties that arise under conditions of imperfect competition can be used in fiscal and monetary economic policy.

The role of fundamental uncertainty in economics and decision-making

The subject of this paper is the direct influence of uncertainty on economic decisions. The first part is a historical overview of the use of probability as a decisionmaking tool. The second part explores points of connection between Keynesian economics and uncertainty. After the discussion of epistemological and ontological uncertainty, the substance of fundamental uncertainty is elaborated. A separate section is dedicated to the role of ‘animal spirits’, conventions and ‘black swan’ phenomena. The closing section focusses on atomic and organic interrelationships in the economic material, the relation between complexity and uncertainty, and with the triangle probability-uncertainty-econometrics. The aim of the paper is to substantiate that uncertainty – whether it is termed ‘fundamental’, ‘radical’, ‘irreducible’ or else – is unavoidably and inevitably part of economic reasoning and decision-making.

Relationship between Monetary Policy Instruments and Financial Performance of Commercial Banks in Nigeria

This paper examined the relationship between monetary policy instruments and financial performance of commercial banks in Nigeria. The study was anchored on Keynesian theory and employed causal research design. The Nigerian banking populace is 21 commercial banks, so census approach was adopted. Panel data was utilized and inferential statistical methods were used to analyze the data. The result of regression analysis showed that open market operations had a coefficient of β = 4.851167, ***p = 0.000 implying that it had positive and significant effect on the earning performance of commercial banks in Nigeria. The results also show that monetary policy reforms had positively and significantly intervened on the relationship between open market operations and financial performance of commercial banks in Nigeria of a most distinctive finding of the study. The study concluded that monetary policy instruments as adopted by Central Bank of Nigeria are critical and heavily influenced the performance of banking sector players in Nigeria. The study recommends that Central Bank of Nigeria should be meticulous and involve management of commercial banks when designing policy instruments to enhance the earnings of the commercial banks in Nigeria.

Inflation Surprises in a New Keynesian Economy with a True Consumption Function

Inflation Surprises in a New Keynesian Economy with a True Consumption Function

Влияние кризиса и санкций на развитие рынка розничного кредитования

The article is devoted to the analysis of trends in the development of the retail lending market in Russia in the context of a sharp deterioration in international economic and political relations and aggravation of problems in various sectors of the financial market. The subject of the study is the economic relations arising in the process of functioning of the retail lending market. The object of research in the article is not randomly selected banking sector of the retail lending market. For decades, economists in Russia and the world have emphasized the significant socio-economic role of the retail lending market. However, at the same time, it has been repeatedly noted at various levels that an increase in the volume of lending to the population can have both positive and negative consequences. The positive aspects are the expansion of effective demand and the improvement of the quality of life of citizens. Negative results are seen in a possible decline in the standard of living of the population, due to the growth of expenses related to debt servicing. This contradiction is particularly acute in the conditions of the economic crisis. This determines the relevance of the study. The purpose of the article is to assess the factors influencing the dynamics and structure of the banking sector of the retail lending market. Based on this, the objectives of the study are not only to systematize and analyze trends in the development of the retail lending market, but also to assess the actions of the Bank of Russia in the current situation in the credit market. The correctness of the decisions taken by the banking community and the Bank of Russia, which allowed to prepare for the crisis to a certain extent and minimize the consequences of increased credit and interest rate risks, is emphasized. Assumptions are made on the nature of the functioning of the retail lending market in the short term.The study is based on a comparison of indicators of retail lending market development during periods of certain stability and sanctions. The article focuses on the effectiveness of the Bank of Russia’s application of monetary regulation methods characteristic of Keynesian theory.

Keynesian approach to economy regulation: answers to the challenges facing the agro-industrial complex

The paper presents the main aspects of the Keynesian theory of state economic policy in the context of responding to global challenges and national barriers facing the development of the Russian agro-industrial complex. The purpose of the work is to explore the possibilities of the Keynesian approach to respond to the challenges facing the agro-industrial complex of modern Russia. The methodological basis of the study is an integrated approach. The study identifies the main postulates of Keynesian theory. On the basis of macroeconomic models of aggregate demand and aggregate supply, the Keynesian cross, the features of the Keynesian approach to the regulation of economic activity in terms of investment, savings, and consumption are formulated. The Keynesian macroeconomic model of state policy is presented, implemented by increasing the real volume of investment expenditures through fiscal and monetary policies; methods of increasing effective solvent demand; reducing the fiscal burden on the population and business. The limits of the application of Keynesian methods are defined: "liquidity trap”; the emergence of a chronic budget deficit; the attenuation of the multiplier-acceleration mechanism; “stagflation”; “inflationary spiral”. The relevance of the application of Keynesian methods of regulation in the modern Russian agro-industrial complex is substantiated: fiscal methods can have a beneficial effect on the development of agriculture: the growth of investments in the agricultural sector by 1%, stimulates economic growth in the industry by 0.64%; monetary methods have a long-term significant impact on the agricultural sector development; an increase in effective solvent demand for food in conditions of insufficient demand for food products in Russia is of high importance; a reduction in the fiscal burden can have a beneficial impact on agriculture development.

An analysis of productive investment decision marking in Brazil during the COVID-19 pandemic

The goal of this paper is to analyse, from the perspective of the supply, how Brazilian productive companies act in moments of uncertainty and identifies the main factors that are associated to the execution of productive investment between the beginning of 2020 and the end of 2021, which was marked by COVID-19. Beside that, it´s important to determinate the most important macroeconomic variables that impact the decision of the companies, as economic agents, to make productive investments in the country in times of economic instability. This is a qualitative work that has in its theoretical framework Keynesian theory as the main pillar and it’s also based on the scientific study of the most remarkable Brazilian economists who are concerned with examining the topic. The descriptive analysis showed that the decision making by the capital productive holders in moments of crisis goes with the Keynesian ideas. In summary, economic recovery must come not only through interest rate control, but also combined conjuctural and structural stimulus.

Did trade unions reinforce the neoliberal transformation? The Dutch case

Union responses to the liberalization of the political economy are often portrayed as either beating the same drum for decades or retreating into the defence of an increasingly small group of core workers. This article argues otherwise. A longitudinal ideational analysis of collective bargaining documents issued between 1976 and 2021 by the Netherlands Trade Union Confederation (FNV) shows that the Federation has gradually adapted its Keynesian-inspired interests to a more market-oriented understanding of the labor market, wages, and employment, legitimized by Third Way ideology in the 1990s. During the 2010s the union returns to Keynesian thinking. The findings suggest that the ideological conversion of the trade union movement may have been more significant than currently realized in explaining the liberalization of the labor market.

The role of German media and the (European) public sphere: Framing biases of the press using the example of the Italian sovereign debt crisis 2018

During times of crisis, the press plays a crucial role in communicating and negotiating the crisis. Considering Germany’s strong economic role in the EU, the German (media) perspective on European economic policy issues has a major influence on Europe. In 2018, Italy’s debt crisis posed the risk of a new euro crisis and a domino effect on other countries. Contrasting views of how to resolve economic crises opposed each other, with the Maastricht criteria at the center. Despite high debt, the Italian government pursued a Keynesian policy by increasing the deficit to stimulate economic growth. The European Commission, however, insisted on neoliberal policies and compliance with the criteria. This study discusses the (non)emergence of a European public sphere through the economic policy framing of the Italian sovereign debt crisis. Using quantitative content analysis, the relative prevalence of frames rooted in competing economic policy paradigms (neoliberal/Keynesian) in press coverage is examined. The results show that the neoliberal paradigm and the call for austerity dominate coverage, indicating a possible European public sphere. However, the biased media framing in favor of the European Commission’s and German government’s interests partly contributes to strengthening the nationalistic perspective on this European issue. Overall, the press failed to present the issue in a solution-oriented and pluralistic manner.

Jean-Baptiste Say: A Proto-Austrian Warning against Lord Keynes

Abstract Jean-Baptiste Say is largely forgotten in modern economics; if he is remembered and studied, it is for Say’s Law, which was misinterpreted by John Maynard Keynes, and ended up providing the basis for the General Theory. In this chapter, we review Say’s Law and a more correct interpretation. We then use this to highlight the contributions of Say to modern macroeconomics, the microfoundations of macroeconomics, and entrepreneurship theory. Say was an influential French thinker – modern classical liberalism owes much to him, and would be enriched by a rediscovery of his writings.

Inflationary Effects, Exchange Rate and Economic Growth Rate in Kenya

Human civilization has always been centred on economic growth. Economic growth difficulties are the main focus of government policy and study in the modern, globalized world. Kenya's overarching goal is to become a middle-income nation that is both globally competitive and wealthy and provides its residents with a high quality of life. The Kenya Vision 2030 is the country's development strategy. Different perspectives on the relationship between inflation, exchange rate and economic growth have shown diverging results. This study's particular goals were to determine the effect of inflation and exchange rate on Kenya's economic growth using Keynesian theory. This study used explanatory research design and adopted positivism philosophy. Annual data from 1980 to 2019 giving 40 observations was used. Vector Error Correction (VECM) Model was customized in analyzing the long run and short-run contribution of macroeconomic variables and gross domestic product in Kenya. From the VECM model, R-square value was 58.62, Chi-square of 26.913 (p > Chi2 = 0.0494) showing VECM was fit for parameter estimation. The coefficient of exchange rate was -0.828 with a p-value of 0.001 while the coefficient of inflation was 0.055,p value=0.020.The findings of this study will provide good fiscal and monetary policy recommendations to the government as well as guidance on how to solve the issue of weak economic growth. Because economic growth is predicted to slow down when inflation exceeds a particular threshold, the nation must control inflation. The government should support macroeconomic policies that strengthen the stability of Kenya's exchange rate versus the major world trading currencies while aiming for an ideal level of inflation because foreign currency rates have a detrimental impact on economic growth in Kenya.

Science under Fire: Challenges to Scientific Authority in Modern America

Science under Fire: Challenges to Scientific Authority in Modern America

‘Creabimus!’ Creatively re-thinking the corporation and the social contract

AbstractThis article rethinks the corporation and ‘the social contract with business’ for the post-pandemic era. It uses a double historical orientation centred on the turbulence of the 1930s in Europe and America to insist on the company’s relationship with government, and to explore transformations in the social contract now needed to socialise and ecologise global business. One part of this history looks forward, from Adolf Berle’s modern corporation to the neoliberal corporation and regulatory governance. The article criticises a transformation of regulatory priorities in this era, closely analysing the shift to procedural mandates and questioning the corporate law tactic of ‘enlightening’ companies. The second part looks backwards to industrial modernism and Walter Rathenau in Germany in the interwar era, and also earlier (the late 1890s), to salvage a different understanding of the company and social contract, built around more constructivist visions of law, government and social consciousness. This part of the article is insistent about the metaphysical aspects of law and about developing law’s equalising powers around corporate impactfulness and injustice. It promotes ‘thought’ about collectivism (John Keynes) and the legal and regulatory recalibration that is needed to confront certain amassing challenges of the present. The article makes institutional transformation about shifting onto a different historical axis, whereby we might re-learn collectivist ambitions around the company that co-evolves with law and government, live to the public interest. It proposes a new social contract with business and a new regulatory modus involving law’s ‘Creabimus’ and ‘regulating dangerously’ for situations of widely adverse corporate impactfulness.