post-Keynesian Macroeconomics Research Articles

Synthesizing feminist and post-Keynesian/Kaleckian economics for a purple–green–red transition

The aim of this article is to discuss why we should synthesize feminist and post-Keynesian/Kaleckian economics. We answer three related questions. Why does post-Keynesian economics need feminist economics? Why does feminist economics need post-Keynesian macroeconomics? Finally, what is the relevance of synthesizing feminist and post-Keynesian economics for policy analysis in the twenty-first century? We then present a theoretical synthesis model bringing together and extending the existing macroeconomic models in feminist post-Keynesian economics. Finally empirical findings based on this synthesis model are discussed in a policy context.

Stock-Flow Consistent Model with Repayment of Bank Loans Used to Finance Past Investments

ABSTRACT Stock-flow consistent modelling (SFC) is currently one of the most active fields of research in post-Keynesian macroeconomics. SFC models make it possible to study the dynamics of a monetary economy of production within a consistent accounting framework. However, with some rare exceptions, SFC models do not take into account the repayment of bank loans used to finance business investments. It is assumed that these investments are financed by perpetual loans or by constant turnover. In this article, we reject this assumption and build a model based on recent studies, in which firms repay part of their past debt in each period. We then study the dynamics of this model. The results obtained indicate that the dynamics of an SFC model is significantly affected by taking these repayments into account.

A New Theoretical Framework: New Developmentalism

New Developmentalism is a theoretical framework being defined since the early 2000s searching to understand why most middle-income countries are falling behind the East Asian ones. It is a political economy and a development macroeconomics that originates from development economics and Post-Keynesian Macroeconomics. It argues that fast growth and catching up have been associated to developmentalism, not to economic liberalism. It defines the developmental state as the one that not only is engaged in industrial policy but also manages actively the five macroeconomic prices–mainly the interest and the exchange rate to keep competitive economically the companies that are technically efficient. New developmentalism is critical of fiscal indiscipline, while defends countercyclical fiscal policy, and is strongly critical of current account, arguing that growth is made at home. It has a new model of the Dutch disease from which is possible to deduce the means to neutralize it and achieve economic competitiveness.

New Developmentalism: development macroeconomics for middle-income countries

AbstractThis article resumes New Developmentalism—a theoretical framework being defined since the early 2000s to understand middle-income countries. It is constituted of a political economy and development macroeconomics and originated in development economics and post-Keynesian macroeconomics. From the start, it is an open and development-oriented economics. New Developmentalism focuses on two macroeconomic accounts, the fiscal and the current accounts, and in five macroeconomic prices which the market is unable to keep ‘right’. It affirms that the exchange rate tends to be cyclically overvalued, thus making the competent companies non-competitive and leading the economy to go from crisis to crisis, to the extent that countries are irresponsible in fiscal terms and search to grow with foreign indebtedness. New Developmentalism has a new definition of Dutch disease, and a means to neutralise it. Counterintuitively, it argues that middle-income countries should reject external finance and balance the current account.

An update on Kalecki–Minsky modelling

Within post-Keynesian macroeconomics, the Kaleckian streams analysing demand regimes and the Minskyan streams analysing financial instability have proceeded relatively independently. To develop a comprehensive alternative to mainstream economics, post-Keynesians will have to integrate Kaleckian and Minskyan arguments with an analysis of the supply side. This paper gives a partial update on advances in Kalecki-Minsky modelling. First, theoretically, it discusses the notion of pseudo-Goodwin cycles. Second, it presents empirical findings on endogenous debt cycles. Third, it reviews evidence of the relative size of distributional and financial effects on demand. Fourth, it reports results on the drivers of household debt.

From classical developmentalism and post-Keynesian macroeconomics to new developmentalism

ABSTRACT New developmentalism was a response to the inability of classical developmentalism and post-Keynesian macroeconomics in leading middle-income countries to resume growth. New developmentalism was born in the 2000s to explain why Latin American countries stopped growing in the 1980s, while East Asian countries continued to catch up. This paper compares new developmentalism with classical developmentalism, which didn’t have a macroeconomics, and with post-Keynesian economics, whose macroeconomics is not devoted to developing countries. And shows that to follow the East Asian example is not enough industrial policy, it is also necessary a macroeconomic policy that sets the five macroeconomic prices right, rejects the growth with foreign savings policy, and keeps the macroeconomic accounts balanced.

Intermediation, Money Creation, and Keynesian Macrodynamics in Multi-agent Systems

ABSTRACTThis paper offers a simple computational model of monetary creation, derived from individual agent behavior, that provides additional support for the well-known and more or less universally accepted idea that money creation is inevitable in demand-driven Keynesian economies. The endogeneity of money is linked to asynchronous production, in which investment is set autonomously by a combination of animal spirits and capacity utilization, while savings adjusts to bring about macroeconomic equilibrium. It is seen that once these Keynesian motifs are translated into the agent-based framework, endogenous money arises as a natural consequence of the model. The contribution of the paper is twofold. First, it links endogenous money creation to decision making in real historical time—two shibboleths of post-Keynesian macroeconomics. Second, it suggests a fruitful cross-fertilization between post-Keynesian economics and the methods of agent-based modeling.

Demand, credit and macroeconomic dynamics. A micro simulation model

We develop a micro simulation model for the macroeconomic business cycle. Our model is based on three main ideas. First, we want to specify how macroeconomic coordination is achieved without a dominating influence of price mechanisms. Second, we want to incorporate the stock-flow-consistent (SFC) approach that has become popular in post-Keynesian macroeconomics. Existing macroeconomic models often pay no attention to how short-run outcomes (in the form of surpluses or deficits on the account balances of individual agents, or groups of agents) accumulate into long-run debt. The SFC approach models such deficits and surpluses, and their accumulation, explicitly, and imposes a logic in which these long-run balances co-determine the macroeconomic coordination outcome. Third, we want to allow for bankruptcies as a major mechanism in the business cycle. In reality, bankruptcies are a way in which long-run balances get adjusted, but most often the SFC models do not allow bankruptcies as a way in which long-run balances adjust. In our model, bankruptcies arise because agents do not adapt their behavior quickly enough as debt, or assets, accumulate. This is parametrized, so that bankruptcies can disappear in the simulation runs, which enables us to compare the nature of business cycles with and without bankruptcies. Our results show a clear business cycle that is driven by accumulation of financial assets and the effects this has on the real economy. By changing some of the key parameters, we show how the nature of the business cycle changes as a result of changes in the assumed behavior of agents.

Post-Keynesian macroeconomics since the mid 1990s: main developments

In this paper the main developments in post-Keynesian macroeconomics since the mid 1990s will be reviewed. For this purpose the main differences between heterodox economics in general, including post-Keynesian economics, and orthodox economics will be reiterated and an overview of the strands of post-Keynesian economics, their commonalities and developments since the 1930s will be outlined. This will provide the grounds for touching upon three important areas of development and progress of post-Keynesian macroeconomics since the mid 1990s: first, the integration of distribution issues and distributional conflict into short- and long-run macroeconomics, both in theoretical and in empirical/applied works; second, the integrated analysis of money, finance and macroeconomics and its application to changing institutional and historical circumstances, such as the process of financialisation; and third, the development of full-blown macroeconomic models, providing alternatives to the mainstream ‘New Consensus Model’ (NCM), and allowing us to derive a full macroeconomic policy mix as a more convincing alternative to the one implied and proposed by the mainstream NCM, which has dramatically failed in the face of the recent crises.

Gendering Post-Keynesian Monetary Macroeconomics With Situated Knowledge

This paper suggests that the conception of fundamental uncertainty grounding post-Keynesian monetary macroeconomics is consistent with a particularly complex type of decision making characterized by the social determination of preferences and outcomes. Contrary to the argument that positivism grounds post-Keynesian analysis, such a framework of analysis reflects a world in which knowledge is situated. As a practical consideration, this paper considers briefly the implications for a gendered theory of financial instability in a Post-Keynesian monetary framework.

Weaknesses of ‘wage-led growth’*

The emphasis in post-Keynesian macroeconomics on wage- versus profit-led growth may not have been helpful. The profit share is not an exogenous variable, and the correlations between the profit share and economic growth can be positive for some exogenous shocks but negative for others. The terminology, second, suggests a unidirectional causality from distribution to aggregate demand while in fact distribution can itself be directly affected by shifts in aggregate demand. The reduced form correlations, third, depend on interactions with the labor market, and a focus on the goods market can be misleading. If, fourth, empirical estimates are taken at face value, the support for wage-led conclusions is much weaker than suggested by the literature. A focus on the growth benefits of a reduction in inequality, finally, makes for an impoverished policy discussion.

European growth models and working class restructuring: An International post-Keynesian Political Economy perspective

This paper builds on post-Keynesian macroeconomics, the French Regulation Theory and a Neo-Gramscian International Political Economy approach to class analysis to propose an International post-Keynesian Political Economy approach that is used to offer an empirical analysis of European growth models and working class restructuring in Europe between 2000 and 2008. We will distinguish between the ‘East’, the ‘North’ and the ‘South’ and structure our analysis around industrial upgrading, financialisation and working class coherence. We find an export-driven growth model in the North, which came with wage suppression and outsourcing to the East. In the East, the growth model can be characterised as dependent upgrading, which allowed for high real wage growth despite declining working class coherence. The South experienced a debt-driven growth model with a real estate bubble and high inflation rates resulting in large current account deficits. Our analysis shows that class restructuring forms an integral part in the economic process that resulted in European imbalances and the Euro crisis.

Gendering a Post-Keynesian Theory of Financial Crises

This paper speculates about the meaningful integration of gender into a post-Keynesian macroeconomic theory of economic crises. It links main themes in feminist and other works with key elements of a post-Keynesian theory of crisis and highlights an important methodological challenge. If straightforward resolution to this challenge is possible, gendering post-Keynesian macroeconomics will enrich heterodox theory easily in important ways. Alternatively, if fundamental incompatibilities prevent the facile extension of intergroup inequality to more than just income inequality, the resulting debate will be that much more important to engage.

Gendering a post-Keynesian theory of financial crises

This paper speculates about the meaningful integration of gender into a post-Keynesian macroeconomic theory of economic crises. It links main themes in feminist and other works with key elements of a post-Keynesian theory of crisis, and highlights an important methodological sticking point. It argues that if the post-Keynesian approach is understood to be consistent with a non-positivist philosophical approach to economics, gendering post-Keynesian macroeconomics will readily enrich this theory.

Uncertainty, bounded rationality and post-Keynesian Macroeconomics

As a core element in mainstream neoclassical theory we assume that economic agents behave rationally. They have full information about everything of economic relevance at present, as well as concerning the future. They either maximize their profit or their utility. Is the model of the rational economic man realistic and a useful concept? According to post-Keynesians and the school of bounded rationality (e.g. the works of Herbert Simon and others) the answer to this question is ›No‹. In this paper we discuss some aspects of bounded rationality and the position taken by Keynes and by the post-Keynesians who argued that actual behaviour is restricted and less than perfect due to the existence of fundamental uncertainty as pointed out by Keynes in his General Theory. Therefore, the macroeconomic system should be seen as an open, changeable and path-dependent system.

Post-Keynesian Macroeconomics: Basic Perspectives

The paper considers basic perspectives of post-Keynesian macroeconomics. The author describes post-Keynesian views on theories of durables choice, endogenous money, financial fragility, hysteresis, conflict inflation and endogenous growth. The paper shows distinctions of post-Keynesian approach from both neoclassical tradition and other branches of Keynesianism. The author examines links between post-Keynesian macroeconomics and macroeconomics of Keynes. The paper also considers post-Keynesian views on economic policy and analyzes the relevance of post-Keynesian approach for the post-Soviet Russian economy.

A geometry for non-Walrasian general equilibrium theory

The emergence of non-Walrasian general equilibrium theory has played a critical role in providing microfoundations for macroeconomics. This is especially true of fix-price general equilibrium theory and post-Keynesian macroeconomics. The purpose of the present paper is to develop a systematic geometry for non-Walrasian equilibrium analysis, including the theory of coupons equilibrium. This should provide a useful analytical and pedagogic tool for studying the macroeconomic base of macro issues like unemployment and repressed inflation.

On the post-Keynesian tradition and industrial economics∗

In this paper it is first argued that there are significant inconsistencies between industrial economics and neoclassical economics, and that there is a substantial degree of common ground between industrial economics and the postkeynesian tradition. There are, however, some deep-seated differences between post-Keynesian economists over matters such as motivation of firms and the relationship between profits and investment. The nature of competion is discussed and it is argued that the post-keynesian approaches have tended to under rate the role of rivalry. There is then some consideration of the institutional realities of the late twentieth-century industrialized economies. It is argued that there is an essential complementarity between post-keynesian industrial economics (based on imperfect competition) and keynesian macroeconomics, emphasizing that micro-and macroeconomic analyses cannot be separated.

Simultaneous Fluctuations in Prices and Output-a Business Cycle Approach

The coexistence in recent years of high rates of inflation and high levels of unemployment has focused attention on the problem of what the factors are that determine the manner in which variations in money income are divided up between variations in real income and employment on the one hand and in prices on the other. The hypothesis of a negative rate of trade-off between wage inflation (and hence presumably price inflation) and unemployment, embodied in the simple Phillips curve, has fallen into widespread disrepute in the face of this recent evidence.2 At the same time, more elaborate versions of the Phillips curve that allow for the influence of inflationary expectations, though they are compatible with this evidence, have commanded much less than universal acceptance. This paper first argues that there are a number of quite central questions about inflationary situations on which even sophisticated Phillips-curve analysis is silent. Second, it attempts to bring together orthodox post-Keynesian macro-economics and a species of Phillipscurve analysis in an extremely simple model of price and output fluctuations in terms of which the above-mentioned questions may be analysed; moreover, the model's predictions about the interaction of these variables appear to be of some empirical interest.