A macroeconometric framework for the analysis of monetary policy Part V: Extensions 13. In each country, there are commodity, labor, bond, money, and foreign exchange to the key currency markets. View all references growth cycle type, identified as a stable depression and a stable boom, and a saddle-path stable equilibrium in between them. Representative households or principal-agent capitalism? Matching the combination of real and nominal inertia in responses to monetary policy found in the data requires a more complex model, with more sources of stickiness and inertia, than has been standard in the literature. Asset Price Volatility and Monetary Policy Rules 10. Technological progress effects income distribution as well as employment.
Peter Flaschel is Professor of Economics at Bielefeld University, Germany. Austrian economics and its capital-based macroeconomics provide better guidance on cause, recovery, and more importantly, prevention. When monetary policy has only short-run effects on real variables, the inability to approximately capture the short-run responses of inflation or real variables to policy shocks makes a model unsuitable for policy analysis. This book will also engage central bankers and macroeconomic policy makers. We find that policies that on net increase the fraction of the relatively wealthiest residents in the poorest community are welfare enhancing; policies that decrease this fraction can make all worse off.
It also has a banking sector, represented by a single commercial bank that provides investment funds to the demand-constrained firms, thus providing money supply endogenously. The main conclusion of the work is that policy makers need to reconsider Keynesian ideas, but in the modern form in which they are expressed in this volume. Furthermore, theory suggests that the expected labour share negatively affects output. Those feedback mechanisms are known to have the potential for instabilities with respect to real markets, price dynamics and financial markets. A macroeconometric framework for the analysis of monetary policy Part V: Extensions 13. The financial instability and its spillover to the real sector have become a great challenge to macro-economic theory.
These three books will appeal to all graduate students and academics alike who are looking for strong technical analysis rooted in a deep understanding of macroeconomic theory. The fact that the 'phase-locking' effect results under fairly elementary assumptions may be taken to challenge the sophisticated theoretical speculations about the international transmission of business cycles. The authors have done what many economists have failed to do: offer a critical analysis of mainstream macro building and offer their own, thought-provoking and original ideas. The price competitiveness is mainly determined by labor cost denominated in the same currency, hence influenced by a change in exchange rate. Firms located in different countries produce horizontally differentiated commodities so that households in each country purchase consumer goods that are produced domestically or by foreign producers.
© 2009 Willi Semmler, Peter Flaschel, Carl Chiarella and Reiner Franke. The paper also discusses several potential solutions to the problem, including alterations to the expectations assumption, to the order of differencing implicit in the model, and to the underlying behavioral assumptions. The hypotheses explored focus on the determination of unemployment. We discuss an array of models of dynamically optimizing representative firms and workers, with inertia and price-wage stickiness modeled in various ways. Fragilities and destabilizing feedback mechanisms are known to be potential features of all markets— the product markets, the labor market, and the financial markets. Appropriately financed policies to i redistribute income toward the poorest, ii increase spending on education in the poorest community, and iii make the poorest community more attractive to relatively wealthier individuals, produce chain reactions in which the quality of education increases and tax rates fall in all communities. Nonetheless, countries are tightly synchronized with each other even under the influence of fluctuations in exchange rates.
Although this book is inspired and motivated by the Asian currency and financial crises in the years 1997-8 and the experiences of the currently evolving U. The book takes a Keynesian theoretical perspective, representing an attempt to revive what Keynes stressed in his General Theory, namely the role of the financial market in macroeconomic outcomes. Wicksellian inflation pressure in Keynesian models of monetary growth 6. Representative households or principal-agent capitalism? One such approach, based on limited information-processing capacity, is sketched. This paper seeks to show that a possible explanation of excessive exchange rate variability is that the dynamics of exchange rates are being driven by nonlinearities in the underlying economic relationships. We find that employment is demand-led and that income distribution has little effect on either demand or employment. Reclaiming the traditional 'political economy' title, it refrains from emphasising any single school of thought, but instead attempts to foster greater diversity within economics.
The fund managers have their own models to determine the international portfolio composition of their funds. We use a general Keynesian growth model, allowing demand growth to be wage led or profit led, to argue that the case for real wage restraint is based on weak foundations. The novelty of the paper is that countries are asymmetric; only one country serves as a provider of international liquidity to settle payments for international transactions. The tentative results we obtained are that the key currency country has no clear advantage over the other countries. Furthermore full capacity limits lead to viable dynamics from the global point of view if the steady state is locally attracting and to corridor stability with persistent fluctuations when it is repelling. Both stable steady states are surrounded by trajectories that cycle counterclockwise around their basins of attraction. Wicksellian inflation pressure in Keynesian models of monetary growth 6.
Stabilizing a Financially Unstable Economy Part V Higher Dimensional Macrodynamics 13. It examines the Fisher relation and focuses on deviations from the one infinitely lived family models. In this paper we analyse the interaction of macroeconomic activity and the dynamics of real wages from a theoretical perspective. In another view, the model corresponds to rational-expectations theories in which Keynesian properties are absent. The paper studies the role of income distribution within a medium-scale macrodynamic model built in a Keynesian and Goodwinian tradition. The Perils of Broad Banking and Narrow Banking 5.
In this paper we reconsider and generalize a two-dimensional growth cycle model of Skott that is based on supply-side adjustment mechanisms and a Kaldorian theory of income distribution. Viability and corridor stability in Keynesian supply driven growth 5. They invest their funds in bonds across national boundaries. Do trans-national security investments by fund managers stabilize or destabilize global economy? Peter Flaschel is Professor at the Department of Business Administration and Economics, Bielefeld University, Germany. This paper develops a multicommunity model and analyzes policies that affect spending on public education and its distribution across communities. Reconstructing Keynesian Macroeconomics will be of interest to students and researchers who want to look at alternatives to the mainstream macrodynamics that emerged from the Monetarist critique of Keynesianism. In a paper remarkable for its ignorance of the difference between the nonprobabilistic macroeconomics of Keynes and Shackle vs.
The comparative statics of the temporary equilibrium are studied analytically and numerically. This book represents the second of three volumes offering a complete reinterpretation and restructuring of Keynesian macroeconomics and a detailed investigation of the disequilibrium adjustment processes characterizing the financial, the goods and the labour markets and their interaction. We also find that over time, there seems to be a general shift in aggregate demand dynamics towards being profit-led, i. We use a Tobin kind macroeconomic portfolio approach, and the interaction of heterogeneous agents on the financial market to characterize the potentials for fi- nancial market instability. This book represents the second of three volumes offering a complete reinterpretation and restructuring of Keynesian macroeconomics and a detailed investigation of the disequilibrium adjustment processes characterizing the financial, the goods and the labour markets and their interaction.