Levy Institute Publications

  • An Alternative to Sovereign Bond-Backed Securities for the Euro Area


    One-Pager No. 56 | June 2018 | Mario Tonveronachi
    The European Commission's proposal for the regulation of sovereign bond-backed securities (SBBSs) follows the release of a high-level taskforce report, sponsored by the European Systemic Risk Board, on the feasibility of an SBBS framework. The proposal and the SBBS scheme, Mario Tonveronachi argues, would fail to yield the intended results while undermining financial stability.

    Tonveronachi articulates his alternative, centered on the European Central Bank's issuance of debt certificates along the maturity spectrum to create a common yield curve and corresponding absorption of a share of each eurozone country’s national debts. Alongside these financial operations, new reflationary but debt-reducing fiscal rules would be imposed.

  • “America First,” Fiscal Policy, and Financial Stability


    Strategic Analysis, April 2018 | April 2018 | Michalis Nikiforos, Gennaro Zezza
    The US economy has been expanding continuously for almost nine years, making the current recovery the second longest in postwar history. However, the current recovery is also the slowest recovery of the postwar period.

    This Strategic Analysis presents the medium-run prospects, challenges, and contradictions for the US economy using the Levy Institute’s stock-flow consistent macroeconometric model. By comparing a baseline projection for 2018–21 in which no budget or tax changes take place to three additional scenarios, the authors isolate the likely macroeconomic impacts of: (1) the recently passed tax bill; (2) a large-scale public infrastructure plan of the same “fiscal size” as the tax cuts; and (3) the spending increases entailed by the Bipartisan Budget Act and omnibus bill. Finally, Nikiforos and Zezza update their estimates of the likely outcome of a scenario in which there is a sharp drop in the stock market that induces another round of private-sector deleveraging.

    Although in the near term the US economy could see an acceleration of its GDP growth rate due to the recently approved increase in federal spending and the new tax law, it is increasingly likely that the recovery will be derailed by a crisis that will originate in the financial sector.
     

  • 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. 

  • The Measurement of Time and Consumption Poverty in Ghana and Tanzania


    Research Project Reports, August 2018 | August 2018 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila, Kijong Kim, Tamar Khitarishvili
    The Levy Institute Measure of Time and Consumption Poverty
    Time constraints that stem from the overlapping domains of paid and unpaid work are of central concern to the debates surrounding the economic development of developing countries in general and countries of sub-Saharan Africa in particular. Time deficits due to household production are especially acute in these countries due to the poor state of social and physical infrastructure, which constrains the time allocation people can choose.

    Standard measures of poverty fail to capture hardships caused by time deficits. This report applies a methodological approach that incorporates time deficits into the measurement of poverty, known as the Levy Institute Measure of Time and Consumption Poverty (LIMTCP), to the cases of Ghana and Tanzania. The LIMTCP explicitly recognizes the role of time constraints and, as such, has the potential to meaningfully inform the design of policies aimed at poverty reduction and improvement of individual and household well-being. The analysis of simulation exercises assessing the impact of paid employment provision on official and LIMTCP poverty rates has strong implications for policies aimed at poverty reduction, emphasizing the need to account for alleviating not only income but also time constraints. It also has strong gender relevance, as time poverty is more relevant for women due to their disproportionate burden of household responsibilities. Our study argues that policies aimed at improving women’s labor market outcomes can also succeed at improving their well-being only if time constraints are addressed.

  • Public Service Employment: A Path to Full Employment


    Research Project Reports, April 2018 | April 2018 | L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, Stephanie A. Kelton
    Despite reports of a healthy US labor market, millions of Americans remain unemployed and underemployed, or have simply given up looking for work. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton examine the impact of a new “job guarantee” proposal that would seek to eliminate involuntary unemployment by directly creating jobs in the communities where they are needed.
     
    The authors propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour and offer a basic package of benefits. This report simulates the economic impact over a ten-year period of implementing the PSE program beginning in 2018Q1.
     
    Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.

  • 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.
     

  • Stagnating Economic Well-Being and Unrelenting Inequality


    Public Policy Brief No. 146, 2018 | August 2018 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila
    Post-2000 Trends in the United States
    Ajit Zacharias, Thomas Masterson, and Fernando Rios-Avila update the Levy Institute Measure of Economic Well-Being (LIMEW) for US households for the period 2000–13. The LIMEW—which comprises base income, income from wealth, net government expenditures, and the value of household production—is aimed at achieving a more comprehensive understanding of trends in living standards. This policy brief analyzes developments during this period at all levels of the LIMEW distribution, with a particular focus on the significant role played by net government expenditures. The overall trend for 2000–13 was one of historic stagnation in the growth of economic well-being for US households, but an examination of the different components of the measure reveals significant shifts taking place behind this headline trend.
     
    A companion document, the Supplemental Tables, features additional data referenced in the policy brief.
     

  • European Sovereign Bond-Backed Securities


    Public Policy Brief No. 145, 2018 | June 2018 | Mario Tonveronachi
    An Assessment and an Alternative Proposal
    In response to a proposal put forward by the European Commission for the regulation of sovereign bond-backed securities (SBBSs), Mario Tonveronachi provides his analysis of the SBBS scheme and attendant regulatory proposal, and elaborates on an alternative approach to addressing the problems that have motivated this high-level consideration of an SBBS framework.

    As this policy brief explains, it is doubtful the SBBS proposal would produce its intended results. Tonveronachi’s alternative, discussed in Levy Institute Public Policy Briefs Nos. 137 and 140, not only better addresses the two problems targeted by the SBBS scheme, but also a third, critical defect of the current euro system: national sovereign debt sustainability.

  • Wage Employment and the Prospects of Women’s Economic Empowerment


    Policy Note 2018/4 | May 2018 | Thomas Masterson, Ajit Zacharias
    Some Lessons from Ghana and Tanzania
    In this policy note, Thomas Masterson and Ajit Zacharias address the nexus between wage employment, consumption poverty, and time deficits in the context of Ghana and Tanzania. Based on a recently completed research project supported by the Hewlett Foundation, the authors apply the Levy Institute Measure of Time and Consumption Poverty (LIMTCP) to estimate whether the jobs that are likely to be available to potential employment-seeking, working-age individuals in consumption-poor households—who are predominantly female in both countries—can serve as vehicles of “economic empowerment.” They investigate this question using two indicators of empowerment, asking (1) whether the individual would be able to move their household to at least a minimal level of consumption via the additional earnings from their new job and (2) whether the individual would be deprived of the time required to meet the minimal needs of care for themselves (personal care), their homes, and their dependents.

  • A Consensus Strategy for a Universal Job Guarantee Program


    Policy Note 2018/3 | May 2018 | L. Randall Wray
    The idea of a universal job guarantee (JG) policy for the United States has become the subject of renewed public debate due to a number of high-profile political endorsements. L. Randall Wray recently coauthored a report that presented a JG proposal—the Public Service Employment program—along with estimates of the economic impact of the plan. However, several other variants have been proposed and/or endorsed. In this policy note, Wray seeks to establish common ground among the major JG plans and provides an initial response to critics.

  • The Job Guarantee and the Economics of Fear


    One-Pager No. 55 | May 2018 | Pavlina R. Tcherneva
    The job guarantee (JG) is finally getting the public debate it deserves, according to Pavlina R. Tcherneva, and criticism is expected. Following the Levy Institute’s latest report analyzing the economic impact of a JG proposal and providing a blueprint for its implementation, Tcherneva responds to alarmist claims that the JG is (1) an expensive big-government takeover, (2) unproductive and impossible to manage, (3) dangerously disruptive to the private sector, and (4) inflationary.

  • External Instability in Transition


    Working Paper No. 909 | July 2018 | Liudmila Malyshava
    Applying Minsky’s Theory of Financial Fragility to International Markets
    This inquiry argues that the successful completion of the transition process in the post-Soviet economies is constrained by the prevailing social structure and low levels of technological progress, both of which require institutional reforms aimed at increasing growth in national income, productivity, and the degree of export competitiveness. Domestic policy implementation has not shown significant improvements on these fronts, given its short-term orientation, but instead resulted in stagnating growth rates, continuously accumulating levels of external debt, and decreasing living standards. The key to a successful completion of the transition process is therefore a combination of policies targeted at the dynamic transformation of production structures within an environment of financial stability and favorable macroeconomic conditions.

  • Twenty Years after the Fall of the Berlin Wall


    Working Paper No. 908 | June 2018 | W. Lee Hoskins, Walker F. Todd
    Rethinking the Role of Money and Markets in the Global Economy
    Many of the hopes arising from the 1989 fall of the Berlin Wall were still unrealized in 2010 and remain so today, especially in monetary policy and financial supervision. The major players that helped bring on the 2008 financial crisis still exist, with rising levels of moral hazard, including Fannie Mae, Freddie Mac, the too-big-to-fail banks, and even AIG. In monetary policy, the Federal Reserve has only just begun to reduce its vastly increased balance sheet, while the European Central Bank has yet to begin. The Dodd-Frank Act of 2010 imposed new conditions on but did not contract the greatly expanded federal safety net and failed to reduce the substantial increase in moral hazard. The larger budget deficits since 2008 were simply decisions to spend at higher levels instead of rational responses to the crisis. Only an increased reliance on market discipline in financial services, avoidance of Federal Reserve market interventions to rescue financial players while doing little or nothing for households and firms, and elimination of the Treasury’s backdoor borrowings that conceal the real costs of increasing budget deficits can enable the American public to achieve the meaningful improvements in living standards that were reasonably expected when the Berlin Wall fell.
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    Author(s):
    W. Lee Hoskins Walker F. Todd
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  • 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
  • America Classifies the Immigrants


    Book Series, April 2018 | April 2018 | Joel Perlmann
    From Ellis Island to the 2020 Census
    In America Classifies the Immigrants: From Ellis Island to the 2020 Census (Harvard University Press, 2018), Senior Scholar Joel Perlmann traces the evolution of thinking about “race” and “ethnic groups” in America. Beginning with the 1897 “List of Races and Peoples” through the proposed 2020 changes for the US Census, Perlmann examines the shifting ideas about racial and national differences that shape our social and legal policies.

    Published by: Harvard University Press
  • Summary Spring 2018


    Volume 27, No. 2 | April 2018 | Elizabeth Dunn, Michael Stephens
    This issue of the Summary opens with a policy note regarding the predictions of an impending Chinese “Minsky moment” and the far more likely prospect of another crisis in the United States. It also presents the results of a research project investigating the macroeconomic impact of a one-time cancellation of existing US student loan debt.
     
    Working papers included in this issue examine Hyman Minsky’s and Abba Lerner’s writings on the functional finance approach to fiscal policy; the forces underlying the gender pay gap in the countries of the former Soviet Union; and the impact of corporate taxes on capital and labor in a modern, open economy. The issue closes with a look at the newest book in the Levy Institute Book Series, a compilation of essays dedicated to classical political economist, Alessandro Roncaglia.
     
    INSTITUTE RESEARCH
    Program: Monetary Policy and Financial Structure
    • L. RANDALL WRAY, Does the United States Face Another Minsky Moment?
    • L. RANDALL WRAY, Functional Finance: A Comparison of the Evolution of the Positions of Hyman Minsky and Abba Lerner
     
    Program: Gender Equality and the Economy
    • TAMAR KHITARISHVILI, Gender Pay Gaps in the Former Soviet Union: A Review of the Evidence
     
    Program: Economic Policy for the 21st Century
    • SCOTT FULLWILER, STEPHANIE A. KELTON, CATHERINE RUETSCHLIN, and MARSHALL STEINBAUM, The Macroeconomic Effects of Student Debt Cancellation
    • SAMIKSHA AGARWAL and LEKHA S. CHAKRABORTY, Corporate Tax Incidence in India
     
    INSTITUTE NEWS
    New Books in the Levy Institute Book Series
    • Classical Economics Today: Essays in Honor of Alessandro Roncaglia, edited by MARCELLA CORSI, JAN KREGEL, and CARLO D’IPPOLITI
     
    Upcoming Events
    • 27th Annual Hyman P. Minsky Conference
    • The Hyman P. Minsky Summer Seminar
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    Author(s):
    Elizabeth Dunn Michael Stephens

Ford-Levy Institute Projects
 
Levy Institute Publications in Greek

From the Press Room

The Levy Institute announces the passing of Senior Scholar Fernando Cardim de Carvalho

The Levy Institute announces the passing of Senior Scholar Fernando Cardim de Carvalho


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.