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Working Paper No. 655
March 04, 2011
A Minskyan Road to Financial Reform
AbstractIn the aftermath of the global financial collapse that began in 2007, governments around the world have responded with reform. The outlines of Basel III have been announced, although some have already dismissed its reform agenda as being too little (and too late!). Like the proposed reforms in the United States, it is argued, Basel […]
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Working Paper No. 654
March 03, 2011
Measuring Macroprudential Risk
AbstractWith the Great Recession and the regulatory reform that followed, the search for reliable means to capture systemic risk and to detect macrofinancial problems has become a central concern. In the United States, this concern has been institutionalized through the Financial Stability Oversight Council, which has been put in charge of detecting threats to the […]
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Working Paper No. 653
March 02, 2011
Financial Keynesianism and Market Instability
AbstractIn this paper I will follow Hyman Minsky in arguing that the postwar period has seen a slow transformation of the economy from a structure that could be characterized as “robust” to one that is “fragile.” While many economists and policymakers have argued that “no one saw it coming,” Minsky and his followers certainly did! […]
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Working Paper No. 652
March 01, 2011
The Dismal State of Macroeconomics and the Opportunity for a New Beginning
AbstractThe Queen of England famously asked her economic advisers why none of them had seen “it” (the global financial crisis) coming. Obviously, the answer is complex, but it must include reference to the evolution of macroeconomic theory over the postwar period—from the “Age of Keynes,” through the Friedmanian era and the return of Neoclassical economics […]
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Working Paper No. 651
February 14, 2011
Το μοναδιαίο κόστος εργασίας στην ευρωζώνη
AbstractΟι τρέχουσες εισηγήσεις σχετικά με την ανάγκη να μειωθεί το μοναδιαίο κόστος εργασίας (κυρίως μέσω δραστικών μειώσεων των ονομαστικών μισθών) σε ορισμένες χώρες της ευρωζώνης (ειδικότερα στην Ελλάδα, την Ιρλανδία, την Ιταλία, την Πορτογαλία και την Ισπανία) προκειμένου να βγουν από την κρίση οι εν λόγω χώρες μπορεί να μην είναι πανάκεια. Κατ\’ αρχάς, ιστορικά, […]
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One-Pager No. 8
February 14, 2011
It’s Time to Rein In the Fed
AbstractThe economic crisis that has gripped the US economy since 2007 has highlighted Congress’s limited oversight of the Federal Reserve, and the limited transparency of the Fed’s actions. And since a Fed promise is ultimately a Treasury promise that carries the full faith and credit of the US government, the question is, Should the Fed […]
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Working Paper No. 651
February 14, 2011
Unit Labor Costs in the Eurozone
AbstractCurrent discussions about the need to reduce unit labor costs (especially through a significant reduction in nominal wages) in some countries of the eurozone (in particular, Greece, Ireland, Italy, Portugal, and Spain) to exit the crisis may not be a panacea. First, historically, there is no relationship between the growth of unit labor costs and […]
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Policy Notes No. 1
February 11, 2011
What Happens if Germany Exits the Euro?
AbstractLike marriage, membership in the eurozone is supposed to be a lifetime commitment, “for better or for worse.” But as we know, divorce does occur, even if the marriage was entered into with the best of intentions. And the recent turmoil in Europe has given rise to the idea that the euro itself might also be reversible, and that […]
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Working Paper No. 650
January 19, 2011
Fiscal Policy: Why Aggregate Demand Management Fails and What to Do about It
AbstractThis paper argues for a fundamental reorientation of fiscal policy, from the current aggregate demand management model to a model that explicitly and directly targets the unemployed. Even though aggregate demand management has several important benefits in stabilizing an unstable economy, it also has a number of serious drawbacks that merit its reconsideration. The paper […]
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Working Paper No. 649
January 18, 2011
Fiscal Policy Effectiveness: Lessons from the Great Recession
AbstractThis paper reconsiders fiscal policy effectiveness in light of the recent economic crisis. It examines the fiscal policy approach advocated by the economics profession today and the specific policy actions undertaken by the Bush and Obama administrations. An examination of the labor market renders the contemporary aggregate demand–management approach wholly inadequate for achieving certain macroeconomic […]
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Working Paper No. 648
January 06, 2011
Views of European Races among the Research Staff of the US Immigration Commission and the Census Bureau, ca. 1910
AbstractThis paper discusses support for, and opposition to, racial classification of European immigrants among high-level researchers at both the United States Immigration Commission of 1907–11 (the Dillingham Commission) and the Census Bureau during those same years. A critical distinction must be made between the Commission members—political appointees who mostly supported some form of restriction at […]
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Working Paper No. 647
December 24, 2010
Money
AbstractThis paper advances three fundamental propositions regarding money: (1) As R. W. Clower (1965) famously put it, money buys goods and goods buy money, but goods do not buy goods. (2) Money is always debt; it cannot be a commodity from the first proposition because, if it were, that would mean that a particular good […]
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Working Paper No. 646
December 22, 2010
A Demographic Base for Ethnic Survival?
AbstractNew data from the IPUMS (Integrated Public Use Microdata Series) project permit an exploration of the demographic basis for ethnic survival across successive generations. I first explore the degree of ethnic blending among the grandchildren of early- to mid-19th-century German immigrants; second, these descendants’ own marital choices; and third, the likely composition of the fourth […]
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Working Paper No. 645
December 14, 2010
Quantitative Easing and Proposals for Reform of Monetary Policy Operations
AbstractBeyond its original mission to “furnish an elastic currency” as lender of last resort and manager of the payments system, the Federal Reserve has always been responsible (along with the Treasury) for regulating and supervising member banks. After World War II, Congress directed the Fed to pursue a dual mandate, long interpreted to mean full […]
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Working Paper No. 644
December 13, 2010
How Rich Countries Became Rich and Why Poor Countries Remain Poor
AbstractBecoming a rich country requires the ability to produce and export commodities that embody certain characteristics. We classify 779 exported commodities according to two dimensions: (1) sophistication (measured by the income content of the products exported); and (2) connectivity to other products (a well-connected export basket is one that allows an easy jump to other […]
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Working Paper No. 643
December 07, 2010
Modeling Technological Progress and Investment in China
AbstractSince the early 1990s, the number of papers estimating econometric models and using other quantitative techniques to try to understand different aspects of the Chinese economy has mushroomed. A common feature of some of these studies is the use of neoclassical theory as the underpinning for the empirical implementations. It is often assumed that factor […]
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Working Paper No. 642
December 06, 2010
China in the Global Economy
AbstractChina occupies a unique position among developing countries. Its success in achieving relative stability in the financial sector since the institution of reforms in 1979 has given way to relative instability since the beginning of the current global financial crisis. Over the last few years, China has been on a path of capital account opening […]
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Working Paper No. 641
December 02, 2010
Disaggregating the Resource Curse
AbstractThe hypothesis of the natural resource curse has captivated the economics profession, and since the mid-1990s has generated a large body of policymaking initiatives aimed at dispelling the curse. In this paper, we evaluate how the effect of resource abundance on economic growth has changed since these policies were first introduced by comparing the periods […]
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Working Paper No. 640
December 01, 2010
he Central Bank “Printing Press”: Boon or Bane?
AbstractIn recent years, the US public debt has grown rapidly, with last fiscal year’s deficit reaching nearly $1.3 trillion. Meanwhile, many of the euro nations with large amounts of public debt have come close to bankruptcy and loss of capital market access. The same may soon be true of many US states and localities, with […]
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Working Paper No. 639
November 18, 2010
US “Quantitative Easing” Is Fracturing the Global Economy
AbstractThe Federal Reserve’s quantitative easing is presented as injecting $600 billion into “the economy.” But instead of getting banks lending to Americans again—households and firms—the money is going abroad, through arbitrage interest-rate speculation, currency speculation, and capital flight. No wonder foreign economies are protesting, as their currencies are being pushed up.
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Working Paper No. 638
November 17, 2010
Exports, Capabilities, and Industrial Policy in India
AbstractAn extensive literature argues that India’s manufacturing sector has underperformed, and that the country has failed to industrialize; in particular, it has failed to take advantage of its labor-abundant comparative advantage. India’s manufacturing sector is smaller as a share of GDP than that of East Asian countries, even after controlling for GDP per capita. Hence, […]
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One-Pager No. 7
November 13, 2010
Reserve Currencies and the Dollar’s Role in Containing Global Imbalances
AbstractThe stability of the international reserve currency’s purchasing power is less a question of what serves as that currency and more a question of the international adjustment mechanism, as well as the compatibility of export-led development strategies with international payment balances. Export-led growth and free capital flows are the real causes of sustained international imbalances. […]
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One-Pager No. 6
November 12, 2010
Minsky’s View of Capitalism and Banking in America
AbstractBefore we can reform the financial system, we need to understand what banks do—or, better yet, what banks should do. Senior Scholar L. Randall Wray examines Hyman Minsky’s views on banking and the proper role of the financial system—not simply to finance investment in physical capital but to promote the “capital development” of the economy […]
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Working Paper No. 637
November 12, 2010
Financial Stability, Regulatory Buffers, and Economic Growth
AbstractOver the past 40 years, regulatory reforms have been undertaken on the assumption that markets are efficient and self-corrective, crises are random events that are unpreventable, the purpose of an economic system is to grow, and economic growth necessarily improves well-being. This narrow framework of discussion has important implications for what is expected from financial […]
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