• Special Report on the Macroeconomic Effects of Student Debt Cancellation by Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum  MORE >>
  • 26th Annual Hyman P. Minsky Conference Conference audio and video coverage now online  MORE >>
  • The Hyman P. Minsky Summer Seminar, 2017 Blithewood, June 10–16, 2017  MORE >>
  • Master of Science in Economic Theory and Policy An innovative two-year program with a professional focus  MORE >>
  • 25th Annual Hyman P. Minsky Conference Audio and video proceedings are now online.  MORE >>
  • Levy Book Series: Why Minsky Matters By  L. Randall Wray  MORE >>
  • 24th Annual Hyman P. Minsky Conference Conference proceedings and audio available online  MORE >>
  • Athens Conference: Europe at the Crossroads Conference proceedings now available online  MORE >>

Levy Institute Publications

  • The Macroeconomic Effects of Student Debt Cancellation

    Research Project Report, February 2018 | February 2018 | Scott Fullwiler, Stephanie A. Kelton, Catherine Ruetschlin, Marshall Steinbaum
    Among the more ambitious policies that have been proposed to address the problem of escalating student loan debt are various forms of debt cancellation. In this report, Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum examine the likely macroeconomic impacts of a one-time, federally funded cancellation of all outstanding student debt.

    The report analyzes households’ mounting reliance on debt to finance higher education, including the distributive implications of student debt and debt cancellation; describes the financial mechanics required to carry out the cancellation of debt held by the Department of Education (which makes up the vast majority of student loans outstanding) as well as privately owned student debt; and uses two macroeconometric models to provide a plausible range for the likely impacts of student debt cancellation on key economic variables over a 10-year horizon.

    The authors find that cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve). These results suggest that policies like student debt cancellation can be a viable part of a needed reorientation of US higher education policy.

  • The Trump Effect: Is This Time Different?

    Strategic Analysis, April 2017 | April 2017 | Michalis Nikiforos, Gennaro Zezza
    From a macroeconomic point of view, 2016 was an ordinary year in the post–Great Recession period. As in prior years, the conventional forecasts predicted that this would be the year the economy would finally escape from the “new normal” of secular stagnation. But just as in every previous year, the forecasts were confounded by the actual result: lower-than-expected growth—just 1.6 percent.
    The radical policy changes promoted by the new Trump administration dominated economic conditions in the closing quarter of the year and the first quarter of 2017. Markets have responded with exuberance since the November elections, on the expectation that the proposed policy measures would increase profitability by boosting growth and cutting personal and corporate taxes. However, an evaluation of the US economy’s structural characteristics reveals three key impediments to a robust, sustainable recovery: income inequality, fiscal conservatism, and weak net export demand. The new administration’s often conflicting policy proposals are unlikely to solve any of these fundamental problems—if anything, the situation will worsen.
    Our latest Strategic Analysis provides two medium-term scenarios for the US economy. The “business as usual” baseline scenario (built on CBO estimates) shows household debt and GDP growth roughly maintaining their moribund postcrisis trends. The second scenario assumes a sharp correction in the stock market beginning in 2017Q3, combined with another round of private sector deleveraging. The results: negative growth and a government deficit of 8.3 percent by 2020—essentially a repeat of the crisis of 2007–9. 

  • Greece: Getting Out of the Recession

    Strategic Analysis, September 2016 | October 2016 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro Zezza

    The Greek government has agreed to a new round of fiscal austerity measures consisting of a sharp increase in taxes on income and property and further reductions in pension and other welfare-related expenditures. Based on our model of the Greek economy, policies aimed at reducing the government deficit will cause a recession, unless other components of aggregate demand increase enough to more than offset the negative impact of fiscal austerity on output and employment.

    In this report we argue that the troika strategy of increasing net exports to restart the economy has failed, partly because of the low impact of falling wages on prices, partly because of the low trade elasticities with respect to prices, and partly because of other events that caused a sharp reduction in transport services, which used to be Greece’s largest export sector.

    A policy initiative to boost aggregate demand is urgently needed, now more than ever. We propose a fiscal policy alternative based on innovative financing mechanisms, which could trigger a boost in confidence that would encourage renewed private investment.

  • Destabilizing an Unstable Economy

    Strategic Analysis, March 2016 | March 2016 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro Zezza
    Our latest strategic analysis reveals that the US economy remains fragile because of three persistent structural issues: weak demand for US exports, fiscal conservatism, and a four-decade trend in rising income inequality. It also faces risks from stagnation in the economies of the United States’ trading partners, appreciation of the dollar, and a contraction in asset prices. The authors provide a baseline and three alternative medium-term scenarios using the Levy Institute’s stock-flow consistent macro model: a dollar appreciation and reduced growth in US trading partners scenario; a stock market correction scenario; and a third scenario combining scenarios 1 and 2. The baseline scenario shows that future growth will depend on an increase in private sector indebtedness, while the remaining scenarios underscore the linkages between a fragile US recovery and instability in the global economy. 

  • Rising Corporate Concentration, Declining Trade Union Power, and the Growing Income Gap

    e-pamphlet, March 2016 | March 2016 | Jordan Brennan
    American Prosperity in Historical Perspective
    Jordan Brennan, of Unifor and the Canadian Centre for Policy Alternatives, examines the rise of income inequality and the deceleration of economic growth in the United States in this two-part analysis. The first section explores the consolidation of corporate power, through mergers and acquisitions, between 1895 and 2013, and finds that reduced competition, declines in fixed asset investment, and the rise of practices such as stock buybacks have shifted investment away from the real economy, leading to weak economic growth and rising income inequality. The second section of Brennan’s analysis examines the interplay of labor unions, inflation, and income inequality. The author observes that the decline of unions as a countervailing force to corporate power and anti-inflationary monetary policy have shifted income away from middle- and lower-income groups. Similarly, he observes that over the past century inflation has tended to redistribute income from capital to labor—from the upper to the lower income strata. In this context, he observes that anti-inflation policy is a use of state power to effect a regressive redistribution of income.  
    Associated Program:
    Jordan Brennan

  • A Two-Tier Eurozone or a Euro of Regions?

    Public Policy Brief No. 144, 2017 | September 2017 | Jan Kregel
    A Radical Proposal Based on Keynes’s Clearing Union
    In light of the problems besetting the eurozone, this policy brief examines the contributions of John Maynard Keynes and Richard Kahn to early debates over the design of the postwar international financial system. Their critical engagement with the early policy challenges associated with managing international settlements offers a perspective from which to analyze the flaws in the current euro-based financial system, and Keynes’s clearing union proposal offers a template for a better approach. A system of regional federations employing a clearing system in which members either retained their own currency or used a common currency as a unit of account in registering debits and credits for settlement purposes would preserve domestic policy independence and retain regional diversity.

  • Brazil Still in Troubled Waters

    Public Policy Brief No. 143, 2017 | February 2017 | Fernando J. Cardim de Carvalho

    Since inheriting the Brazilian presidency five months ago, the new Temer administration has successfully ratified a constitutional amendment imposing a radical, two-decades-long public spending freeze, purportedly aimed at sparking an increase in business confidence and investment. In this policy brief, Fernando Cardim de Carvalho explains why this fiscal strategy is based not only on a flawed conception of the drivers of private-sector confidence and investment but also on a mistaken view of the roots of the current Brazilian economic crisis. The hoped-for “expansionary fiscal consolidation” is not likely to be achieved.

  • Does the United States Face Another Minsky Moment?

    Policy Note 2018/1 | February 2018 | L. Randall Wray
    It is beginning to look a lot like déjà vu in the United States. According to Senior Scholar L. Randall Wray, the combination of overvalued stocks, overleveraged banks, an undersupervised financial system, high indebtedness across sectors, and growing inequality together should remind one of the conditions of 1929 and 2007. Comparing the situations of the United States and China, where the outgoing central bank governor recently warned of the fragility of China’s financial sector, Wray makes the case that the United State is far more likely to “win” the race to the next “Minsky moment.” Instead of sustainable growth, we have “bubble-ized” our economy on the back of an overgrown financial sector—and to make matters worse, he concludes, US policymakers are ill-prepared to deal with the coming crisis.

  • How Time Deficits and Hidden Poverty Undermine the Sustainable Development Goals

    Policy Note 2017/4 | November 2017 | Ajit Zacharias
    The predominant framework for measuring poverty rests on an implicit assumption that everyone has enough time available to devote to household production or enough resources to compensate for deficits in household production by purchasing market substitutes. Senior Scholar Ajit Zacharias argues that this implicit bias in our official poverty statistics threatens to undermine the Sustainable Development Goals (SDGs).

    The SDGs include the following targets: (1) reduce the incidence of poverty by 50 percent by 2030, and (2) recognize and provide support to the unpaid provision of domestic services and care of persons undertaken predominantly by women in their households. This policy note suggests that a closer link exists between poverty reduction and support for household production activities than is commonly acknowledged. Failure to recognize the link in policy design can contribute to failure on both fronts. To obtain a more accurate assessment of poverty, time deficits in household production must be taken into account.

  • Why the United States Will Beat China to the Next Minsky Moment

    One Pager No. 54 | February 2018 | L. Randall Wray
    The outgoing governor of the People’s Bank of China recently warned of a possible Chinese “Minsky moment”—Paul McCulley’s term, most recently applied to the 2007 US real estate crash that reverberated around the world as a global financial crisis. Although Western commentators have weighed in on both sides of the debate about the likelihood of China’s debt bubble bursting, Senior Scholar L. Randall Wray argues that too little attention is being paid to the far more probable repeat of a US Minsky moment. US prospects for growth, as well as for successfully handling the next financial meltdown, are dismal, he concludes.

  • Falling Labor Force Participation

    One-Pager No. 53 | February 2017 | Flavia Dantas, L. Randall Wray
    Demographics or Lack of Jobs?

    Aging demographics, “social shifts,” and other supply-side and institutional factors have commonly been blamed for the fall in the US labor force participation rate. However, depressed labor force participation for prime-age workers is likely due to a combination of insufficient aggregate demand, weak job creation, and stagnant wages—all of which have been persistent problems over the past three or four decades. Although insufficient aggregate demand is the main problem, general “Keynesian” pump priming is not the answer. Stimulus needs to take the form of targeted job creation to tighten labor markets for less-skilled workers.

  • Income Distribution, Household Debt, and Aggregate Demand

    Working Paper No. 901 | March 2018 | J. W. Mason
    A Critical Assessment
    During the period leading up to the recession of 2007–08, there was a large increase in household debt relative to income, a large increase in measured consumption as a fraction of GDP, and a shift toward more unequal income distribution. It is sometimes claimed that these three developments were closely linked. In these stories, the rise in household debt is largely due to increased borrowing by lower-income households who sought to maintain rising consumption in the face of stagnant incomes; this increased consumption in turn played an important role in maintaining aggregate demand. In this paper, I ask if this story is consistent with the empirical evidence. In particular, I ask five questions: How much household borrowing finances consumption spending? How much has monetary consumption spending by households increased? How much of the rise in household debt-income ratios is attributable to increased borrowing? How is household debt distributed by income? And how has the distribution of consumption spending changed relative to the distribution of income? I conclude that the distribution-debt-demand story may have some validity if limited to the housing boom period of 2002–07, but does not fit the longer-term rise in household debt since 1980.

  • Functional Finance

    Working Paper No. 900 | January 2018 | L. Randall Wray
    A Comparison of the Evolution of the Positions of Hyman Minsky and Abba Lerner
    This paper examines the views of Hyman Minsky and Abba Lerner on the functional finance approach to fiscal policy. It argues that the main principles of functional finance were relatively widely held in the immediate postwar period. However, with the rise of the Phillips curve, the return of the Quantity Theory, the development of the notion of a government budget constraint, and accelerating inflation at the end of the 1960s, functional finance fell out of favor. The paper compares and contrasts the evolution of the views of Minsky and Lerner over the postwar period, arguing that Lerner’s transition went further, as he embraced a version of Monetarism that emphasized the use of monetary policy over fiscal policy. Minsky’s views of functional finance became more nuanced, in line with his Institutionalist approach to the economy. However, Minsky never rejected his early beliefs that countercyclical government budgets must play a significant role in stabilizing the economy. Thus, in spite of some claims that Minsky should not be counted as one of the “forefathers” of Modern Money Theory (MMT), this paper argues that it is Minsky, not Lerner, whose work remains essential for the further development of MMT.

  • Classical Economics Today: Essays in Honor of Alessandro Roncaglia

    Book Series, March 2018 | March 2018 | Jan Kregel
    Edited by Marcella Corsi, Jan Kregel, and Carlo D'Ippoliti
    Edited by Marcella Corsi, Sapienza University of Rome, Levy Institute Director of Research Jan Kregel, and Carlo D’Ippoliti, Sapienza University of Rome, this new collection of 16 essays is dedicated to Alessandro Roncaglia and deals with the themes that “have characterized his work or represent expressions of his personality, his interests and method," particularly his contributions to the interpretation of classical political economists as a means for informing present-day policy.

    Published by: Anthem Press
  • Why Minsky Matters: An Introduction to the Work of a Maverick Economist

    Book Series, November 2015 | November 2015 | L. Randall Wray
    By L. Randall Wray

    Perhaps no economist was more vindicated by the global financial crisis than Hyman P. Minsky (1919–1996). Although a handful of economists raised alarms as early as 2000, Minsky’s warnings began a half century earlier, with writings that set out a compelling theory of financial instability. Yet even today he remains largely outside mainstream economics; few people have a good grasp of his writings, and fewer still understand their full importance. Why Minsky Matters makes the maverick economist’s critically valuable insights accessible to general readers for the first time. Author L. Randall Wray shows that by understanding Minsky we will not only see the next crisis coming but we might be able to act quickly enough to prevent it.

    As Wray explains, Minsky’s most important idea is that “stability is destabilizing”: to the degree that the economy achieves what looks to be robust and stable growth, it is setting up the conditions in which a crash becomes ever more likely. Before the financial crisis, mainstream economists pointed to much evidence that the economy was more stable, but their predictions were completely wrong because they disregarded Minsky’s insight. Wray also introduces Minsky’s significant work on money and banking, poverty and unemployment, and the evolution of capitalism, as well as his proposals for reforming the financial system and promoting economic stability.

    A much-needed introduction to an economist whose ideas are more relevant than ever, Why Minsky Matters is essential reading for anyone who wants to understand why economic crises are becoming more frequent and severe—and what we can do about it.

    Published by: Princeton

  • Summary Winter 2018

    Volume 27, No. 1 | January 2018 | Elizabeth Dunn, Michael Stephens
    This issue of the Summary opens with a public policy brief that suggests looking to the postwar clearing union proposals made by John Maynard Keynes and Richard Kahn for insight into possible reforms of the current eurozone financial system. Two policy notes featured in this issue focus on current policy in the United States: the first addresses the feasibility of the Trump administration’s campaign promises to the middle class; and the second calls for the implementation of a universal single-payer health system. A third policy note argues that the relationship between time poverty and income poverty must be recognized in policy creation if the UN’s Sustainable Development Goals are to be met.

    Working papers included in this issue: examine the determinants of long-term interest rates for US Treasury securities; build a stock-flow consistent model to assess the relationship between quantitative easing and economic instability; use the Minskyan concept of financial fragility to assess the financial soundness of electricity distribution companies in Brazil; discuss the origins of the “science” of economics from its beginnings in the political economy of Adam Smith; survey Minsky’s contributions to the financialization literature for answers to today’s pressing economic issues; and suggest the application of strategies for containing disease epidemics to reduce the socioeconomic costs of unemployment.

    Program: The State of the US and World Economies
    • JAN KREGEL, A Two-Tier Eurozone or a Euro of Regions? A Radical Proposal Based on Keynes’s Clearing Union
    • TANWEER AKRAM and HUIQING LI, An Inquiry Concerning Long-term US Interest Rates Using Monthly Data
    Program: Monetary Policy and Financial Structure
    • JAN KREGEL, The Concert of Interests in the Age of Trump
    • CAMERON HAAS and TAI YOUNG-TAFT, Quantitative Easing and Asset Bubbles in a Stock-flow Consistent Framework
    • ERNANI TEIXEIRA TORRES FILHO, NORBERTO MONTANI MARTINS, and CAROLINE YUKARI MIAGUTI, Minsky’s Financial Fragility: An Empirical Analysis of Electricity Distribution Companies in Brazil (2007–15)
    • OSCAR VALDES VIERA, The Neoclassicals’ Conundrum: If Adam Smith is the Father of Economics, It Is a Bastard Child
    • CHARLES WHALEN, Understanding Financialization: Standing on the Shoulders of Minsky
    Program: The Distribution of Wealth and Income
    • AJIT ZACHARIAS, How Time Deficits and Hidden Poverty Undermine the Sustainable Development Goals
    Program: Economic Policy for the 21st Century
    • L. RANDALL WRAY, Why the Compulsive Shift to Single Payer? Because Healthcare Is Not Insurable
    • PAVLINA TCHERNEVA, Unemployment: The Silent Epidemic
    Upcoming Events
    • 27th Annual Hyman P. Minsky Conference
    • The Hyman P. Minsky Summer Seminar
    • Recent Levy Institute Publications
    Elizabeth Dunn Michael Stephens

Ford-Levy Institute Projects
Levy Institute Publications in Greek

From the Press Room

Dimitri Papadimitriou joins the hosts of "Bloomberg Daybreak: Europe" to discuss his outlook for the economy.

Greek Economy Minister Dimitri Papadimitriou talks to Sky News's Ian King.

Rania Antonopoulou, former Alternate Minister of Labor of Greece, shares her "own truth."

Rania Antonopoulou, former Alternate Minister of Labor of Greece, shares her "own truth."

The Rock-Star Appeal of Modern Monetary Theory

The Rock-Star Appeal of Modern Monetary Theory

The Sanders generation and a new economic idea
Minsky's Moment

Minsky's Moment

The second in a series of articles on seminal economic ideas looks at Hyman Minsky’s hypothesis that booms sow the seeds of busts.