financialisation income distribution and aggregate demand in the usa this paper investigates the effects of financialisation and functional income distribution on aggregate demand in the usa by estimating the effects of the increase in rentier income dividends and interest payments and housing and financial wealth on consumption and investment the redistribution of income in favour of profits suppresses consumption whereas the increase in the rentier income and wealth has positive effects a higher rentier income decreases investment without the wealth effects the overall effect of the changes in distribution on aggregate demand would have been negative thus a pro capital income distribution leads to a slightly negative effect on growth i e the usa economy is moderately wage led

the two freedoms economic growth and development an empirical study log linear methods are applied to categorical data containing economic freedom political freedom the level of income and the rate of economic growth for a panel of about 100 countries from 1975 to 1992 the main results are given economic freedom the rate of economic growth is independent of political freedom and the level of income given the level of income political freedom is independent of economic freedom and the growth rate the analysis suggests the fundamental effects of economic freedom in fostering economic growth and a high level of income as the condition of a high degree of political freedom

a contribution to the theory of financial fragility and crisis the paper outlines formally three interrelated facets of a financial crisis of domestic origin i a debt financed consumption boom supported by rising asset prices that ends in debt deflation ii a related process of financial evolution of economic agents towards ponzi finance iii resulting systemic illiquidity afflicting the financial sector as a prelude to crisis being placed in relation to theories of exogenous and endogenous money the models indicate how the co evolution of the real and the financial sector results in financial fragility of different types the paper explores formally the specific features of the fragility of various episode of crisis which share a common pattern of gradual build up followed by a sudden collapse of financial confidence through the interaction between the real and the financial sector and concludes with implications for policy copyright the author 2011 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

the rise and evolution of public pension systems security crisis basically the crisis manifests itself by the fact that if young participants in the existing public pension plans were allowed to withdraw and invest voluntarily in their own preferred privately marketed insurance plans they would be able to secure a rate of return that is substantially higher than the rate of return under the existing plan of course this would not be the case if public pension plans were financed by a funding system rather than the existing pay as you go payg system given the paygsystem and the actual decline of birth rates in many western countries future pension tax rates can reach levels as high as 40 percent or more it might be suspected that future generations will not be willing to contribute to the system by the necessary amount making declining benefit rates inevitable if not the altogether elimination of the system notice that if the present generations expects this future development to arise they can calculate their rate of return under the present benefit tax structure to be even lower the inevitable conclusion thus seems to be that if the implicit claims build up under the existing system can be expected not to be allowed by future generations the present generation will do likewise with respect to the claims of the now living older generation however the popular support for public pension plans is not detoriating at present in many western countries thus falsifying the foregoing observation

a minsky crisis a model is developed to illustrate hyman minsky s financial crisis theories a key assumption is that the level of wealth in the economy is determined mac roeconomically with the value of firms assets responding to the state of confidence as reflected by discounted quasi rents on capital the second assumption is that there is high substitutability between liabilities of firms and money in the public s portfolio a downward shift in anticipated profits leads wealth to contract and the public to shift portfolio preferences toward money interest rates rise leading to further dampening of expected profits and a debt deflation crisis can occur

finance saving and accumulation this paper analyzes the interaction between financial and real variables in different time frames and monetary regimes firms finance investment through retained earnings new issues or bank loans and households desired portfolio of financial assets is related to current income flows the average saving propensity becomes an endogenous variable determined jointly by household and firm decisions and it is shown that changes in the basic parameters give rise to both saving and valuation effects contrary to standard keynesian results an increase in a saving parameter may be expansionary if the valuation effect dominates the saving effect copyright 1988 by oxford university press

post keynesian stock flow consistent modelling a survey the aim of the paper is to provide an overview of the current stock ow consistent sfc literature indeed we feel the sfc approach has recently led to a blossoming literature requiring a new summary after the work of dos santos and above all after the publication of the main reference work on the methodology godley and lavoie s monetary economics an integrated approach to credit money income production and wealth the paper is developed along the following lines first a brief historical analysis investigates the roots of this class of models that can be traced as far back as 1949 and the work of copeland second the competing points of view regarding some of its main controversial aspects are underlined and used to classify the different methodological approaches followed in using these models namely we discuss i how the models are solved ii the treatment of time and its implication and ii the need or not for microfoundations these results are then used in the third section of the paper to develop a bifocal perspective which allows us to divide the literature reviewed according to both its subject and the methodology we explore various topics such as financialisation exchange rate modelling policy implication the need for a common framework within the post keynesian literature and the empirical use of sfc models finally the conclusions present some hypotheses and wishes for the possible lines of development of sfc models

money and credit in a keynesian model of income determination this paper integrates the theory of money and credit derived ultimately from wicksell into the keynesian theory of income determination with assets allocated according to tobinesque principles the model deployed has much in common with the modern endogenous money school initiated by kaldor which emphasises the essential role played by credit in any real life economy since production takes time and the future is always uncertain new ground is broken methodologically because all the propositions are justified by simulations of a rigorous 60 equation model making it possible to pin down exactly why the results come out as they do one conclusion of the paper is that there is no such thing as a supply of money distinct from the money which agents wish to hold or find themselves holding this finding is inimical possibly in the end lethal to the way macroeconomics is currently taught as well as to the neoclassical paradigm itself

a synthetic stock flow consistent macroeconomic model of financialisation this article is centred around the notions of shareholder value orientation and financialisation shareholder value orientation is reflected by a high dividend payout ratio applied by firms and the reluctance of firms to finance physical investment via new equity issues financialisation is the more general development towards an increased importance of the financial sector of the economy relative to the non financial sector in this article a synthetic stock flow consistent model is developed that attempts to encompass some important recent works on the effects of financialisation this includes contributions from the fields of mainstream information economics and post keynesian economics we conduct simulations reflecting increased shareholder value orientation and show that the results are consistent with important stylised facts copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

exchange rate indeterminacy in portfolio balance mundell fleming and uncovered interest rate parity models with full stock flow accounting respected the two country open economy portfolio balance model has just two independent equations for asset market clearing it can determine home and foreign interest rates but not the exchange rate if asset market equilibria vary smoothly over time the balance of payments equation in the mundell fleming model is not independent and cannot set the exchange rate either the familiar fixed reserves floating rate vs endogenous reserves fixed rate dichotomy does not exist and fundamentals based econometric models of the exchange rate are bound to fail an alternative is a two country is lm model with exchange rate dynamics added its dynamic properties under uncovered interest rate parity are briefly explored copyright 2004 oxford university press

productivity growth and the political economy of social security the present paper provides an analysis of unfunded social securityas the outcome of a public decision making process in an endogenousgrowth economy it employs a model in which there is a non monotonic relationship beween productivity growth and the scale ofpublic intergenerational redistribution the paper shows thatalthough unfunded social security need not harm growth in general it is likely to harm growth in a democracy this effect isreinforced by population aging

firms leverage ratio and the financial instability hypothesis an empirical investigation for the us economy 1970 2014 there are many minskian interpretations of how financial fragility builds up reflecting the unsolved tensions regarding the transition from micro to macro results in minsky s financial instability hypothesis fih using firm level and macroeconomic data to comply with the variety of fih s interpretations we empirically assess the relations between leverage and financial fragility in the us economy 1970 2014 to evaluate firms financial fragility we deploy minsky s scale from the financially sounder to the more fragile firms hedge speculative and ponzi the main findings are the following i the evolution of the aggregate leverage ratio does not account for the systemic financial fragility measured by the frequency of speculative and ponzi firms and ii within the biggest firms the leverage has increased along with the incidence of hedge financing and for the smallest firms group the opposite has happened we conclude that a positive relation between leverage and financial fragility cannot be deemed to be a general outcome

preference voting in italy votes of opinion belonging or exchange intraparty preference voting is a potentially important possibility for voters in many proportional representation systems especially the italian system three hypotheses that preference voting is

macroeconomic implications of financialisation a growing literature suggests that financialisation may weaken the performance of non financial corporations and constrain the growth of aggregate demand this paper uses two alternative approaches one derived from skott and one from lavoie and godley and two different settings a labour constrained setting and a dual economy setting to evaluate some of the claims that have been made our analysis which pays explicit attention to financial stock flow relations suggests that the qualitative effects of financialisation are insensitive to the precise specification of household saving behaviour but depend critically on the labour market assumptions labour constrained versus dual and the specification of the investment function harrodian versus kaleckian

a simple model of three economies with two currencies the eurozone and the usa this paper presents a keynesian model which describes three countries trading merchandise and financial assets with one another it is initially assumed that all three countries have independent fiscal policies but that two of the countries share a currency hence the model can be used to make a preliminary analysis of the conduct of economic policy in the eurozone vis a vis the rest of the world the usa the main conclusion will be that if all three countries do indeed operate independent fiscal policies the system will work under a floating currency regime but only so long as the european central bank is prepared to modify the structure of its assets by accumulating an ever rising proportion of bills issued by any weak euro country

a foxy hedgehog wynne godley and macroeconomic modelling wynne godley has made enormous contributions to macroeconomic modelling they are reviewed here in connection with his recent book with marc lavoie monetary economics an integrated approach to credit money income production and wealth copyright the author 2008 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

freedom and other variables in the choice of public pension systems there are three types of public pension systems popular throughout the world pay as you go defined benefit funded defined contribution and mixed the latter two systems were largely adopted in the 1990s after chile successfully built its funded system in this paper we analyze the choice of these types of pension system identifying factors that affect countries choice several measures of freedom economic and political are associated with these choices the estimated effects of the two freedoms on pension choice and percent elderly are quite interesting and intuitive

a stock flow consistent macro econometric model of the uk economy part i this paper is the second of a series of two which describe the estimation and simulation of a stock flow consistent macro economic model of the uk economy the first part davis 1987 surveyed the theoretical literature on stock adjustment dynamics criticized existing uk forecasting models for omitting many potential stock flow interactions and gave an outline of the model which is constructed here the estimation and simulation results suggest that variables encapsulating such stock flow effects are frequently significant in the estimation of key equations and that their inclusion may make a sizeable difference to the simulation properties of a model

peering over the edge of the short period the keynesian roots of stock flow consistent macroeconomic models this work argues that institutionally rich stock flow consistent models i e models in which economic agents are identified with the main social categories institutional sectors of actual capitalist economies the short period behaviour of these agents is thoroughly described and the period by period balance sheet dynamics implied by the latter is consistently modelled are i perfectly compatible with keynes theoretical views ii the ideal tool for rigorous post keynesian analyses of the medium run and therefore iii crucial to the consolidation of the broad post keynesian research programme copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

the cambridge school of keynesian economics there have been strong ties between the cambridge journal of economics cje and the cambridge school of keynesian economics from the very beginning in this paper the author investigates the environment that saw the birth of the cje at cambridge uk in 1977 and the relationship that linked it to the direct pupils of keynes a critical question is explicitly examined why didn t the keynesian revolution succeed in becoming a permanent winning paradigm some behavioural mistakes of the members of the keynesian school may explain this lack of success but only to a certain extent in any case there were and there still are remedies too but what we are inheriting is a unique set of analytical building blocks the paper lists eight of them that makes this school of economics a viable and in some directions definitely superior alternative to mainstream economics admittedly there is some important work still to be done the paper highlights the need for a two stage approach addressing pure theory and extensive institutional analysis it is argued that a combination of the two would strengthen the coherence of the theoretical foundations and at the same time would provide a fruitful extension of economic analysis to empirical institutional and economic dynamics investigations copyright 2005 oxford university press

a simplified stock flow consistent dynamic model of the systemic financial fragility in the new capitalism in the last few years many financial analysts and heterodox economists but even some dissenters among orthodox economists have referred to the contribution of hyman p minsky as fundamental to understanding the current crisis however it is well known that the traditional formulation of minsky s financial instability hypothesis shows serious internal logical problems furthermore minsky s analysis of capitalism must be updated on the basis of the deep changes which during the last three decades have concerned the world economy in order to overcome these theoretical and empirical troubles this paper first introduces the reader to the mechanics of the financial instability theory according to the formulation of the traditional minskian literature section 2 second it shows why minsky s theory cannot be regarded as a general theory of the business cycle section 3 third the paper attempts to supply a simplified but consistent re formulation of minsky s theory by inter breeding it with inputs coming from the new cambridge theories and the current formal minskian literature the aim of this is to analyze the impact of both capital asset inflation and consumer credit on the financial soundness of the non financial business sector sections 4 7 some concluding remarks are provided in the last part of the paper section 8

long waves and short cycles in a model of endogenous financial fragility this paper presents a stock flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors changes in firms and households financial practices produce long waves the hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles and simulations illustrate stable limit cycles the long waves are characterized by periodic economic crises following long expansions short cycles generated by the interaction between effective demand and labor market dynamics fluctuate around the long waves

is pension reform conducive to higher saving declining fertility mortality and productivity rates in developed countries and the popularity of the social security privatization in chile as a pathway to financial development have sparked a global interest in social security reform this paper analyzes the effect of social security on saving using a panel of countries over 25 years variation in the characteristics of social security systems is used to determine whether less reliance on a pay as you go unfunded system is associated with higher national saving there is little evidence that countries that implement defined contribution reforms have higher trends in saving rates after the reform cross sectionally countries with pay as you go systems tend to have lower saving rates and this effect increases with the coverage rate on the system