Finance, investment and macroeconomic performance

Finance, power and distribution are issues that are largely absent in conventional macroeconomics. This paper outlines the implicit economic process embedded in the neo-classical and new-Keynesian constructions of macroeconomics regarding the finance-investment relation. It then develops a general post-Keynesian framework and argues that finance, power and income distribution are significant determinants of investment and macroeconomic activity.peer-reviewe

Debt crisis, fiscal austerity and the financial fragility and instability in the Greek economy

Drawing on Minsky’s theoretical framework, we critically assess the effectiveness of the currently implemented fiscal austerity measures in the Greek economy. We develop and apply two indexes that encapsulate the financial fragility in the public sector and the macroeconomy. The statistical evidence suggests that over the last 5-6 years prior to the onset of the crisis the public sector was situated in the ultra-ponzi area and the financial fragility of the Greek economy was steadily increasing, making the economy extremely vulnerable to potential shocks. We show that the fiscal austerity measures do not produce a substantial decline in the financial fragility of the public sector; they also set the stage for chronic financial instability in the economy. We call for a fundamental change in the policy mix currently implemented in the Greek econom

Working paper no.39: Finance and crisis: Marxian, institutionalist andcircuitist approaches

Most mainstream neoclassical economists completely failed to anticipate the crisis which broke in 2007 and 2008. There is however a long tradition of economic analysis which emphasises how growth in a capitalist economy leads to an accumulation of tensions and results in periodic crises. This paper first reviews the work of Karl Marx who was one of the first writers to incorporate an analysis of periodic crisis in his analysis of capitalist accumulation. The paper then considers the approach of various subsequent Marxian writers, most of whom locate periodic cyclical crises within the framework of longer-term phases of capitalist development, the most recent of which is generally seen as having begun in the 1980s. The paper also looks at the analyses of Thorstein Veblen and Wesley Claire Mitchell, two US institutionalist economists who stressed the role of finance and its contribution to generating periodic crises, and the Italian Circuitist writers who stress the problematic challenge of ensuring that bank advances to productive enterprises can successfully be repaid

Finance and crisis: Marxian, institutionalist and circuitist approaches

Most mainstream neoclassical economists completely failed to anticipate the crisis which broke in 2007 and 2008. There is however a long tradition of economic analysis which emphasises how growth in a capitalist economy leads to an accumulation of tensions and results in periodic crises. This paper first reviews the work of Karl Marx who was one of the first writers to incorporate an analysis of periodic crisis in his analysis of capitalist accumulation. The paper then considers the approach of various subsequent Marxian writers, most of whom locate periodic cyclical crises within the framework of longer-term phases of capitalist development, the most recent of which is generally seen as having begun in the 1980s. The paper also looks at the analyses of Thorstein Veblen and Wesley Claire Mitchell, two US institutionalist economists who stressed the role of finance and its contribution to generating periodic crises, and the Italian Circuitist writers who stress the problematic challenge of ensuring that bank advances to productive enterprises can successfully be repaid

The financial fragility and the crisis of the Greek government sector

The purpose of this paper is to develop Minskyan financial fragility indices for the government sector and to examine the financial structure of the Greek government before and after the onset of the sovereign debt crisis in 2009. We provide empirical evidence that clearly shows the growing financial fragility of the Greek public sector in the 2000s. We also assess the effectiveness of the implemented bailout adjustment programmes in Greece and claim that the conducted austerity measures and fiscal consolidation have not significantly improved the financial posture of the Greek government sector. We argue that the implementation of fiscal and wage austerity in an economy that lacks structural competitiveness produces prolonged recession and unemployment with adverse feedback effects on the financial fragility of the government

Finance, Investment and Macroeconomic Performance

Finance, power and distribution are issues that are largely absent in conventional macroeconomics. This paper outlines the implicit economic process embedded in the neo-classical and new-Keynesian constructions of macroeconomics regarding the finance-investment relation. It then develops a general post-Keynesian framework and argues that finance, power and income distribution are significant determinants of investment and macroeconomic activity.Finance, Income Distribution, Investment, Macroeconomic Activity

Finance, Monetary Policy and the Institutional Foundations of the Phillips Curve

The purpose of this paper is to examine the influence of financial commitments on the short-run Phillips curve, under different institutional structures of the labour and product market, degrees of euphoria and ratios of firms' to workers' outstanding debt. We develop a Post-Keynesian conflicting-claims model that explicitly incorporates the impact of workers' and firms' financial commitments on distribution conflict and inflation. We propose different versions of the short-run Phillips curve for a debt-financed economy. We explore the impact of monetary policy on the shape and the position of the Phillips curve. We show that the inflation effects of monetary policy cannot be identified without prior knowledge about the institutional and financial structures of the economy, as well as about borrowers' desired margins of safety. © 2013 Taylor & Francis

Finance, inflation and employment: a post-Keynesian/Kaleckian analysis

The purpose of this paper is to contribute to the post-Keynesian/Kaleckian macroeconomic literature. We develop a macroeconomic model that explicitly integrates the role of borrowing and cash payment commitments on outstanding debt (interest plus principal repayment) into the consumption and investment expenditures, as well as into the inflation-generating process. We explore the way that finance influences the distribution effects of inflation in the demand-side of a money/credit-using economy; we suggest a new Phillips curve that encapsulates the impact of financial commitments on wage and profit claims. We argue that high debt and cash payment commitments are likely to be associated with a positive demand-side effect of inflation on the rate of employment; and that they might be conducive to a negative supply-side effect of employment on the inflation rate. Copyright The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Macroeconomic Policy and Unemployment: Empirical Evidence from the Euroland

Τhe emergence of the neo-liberal doctrine in the European Union (EU), as this is reflected by the prevalence of monetarism and market deregulation, has spawned a wave of criticism to be leveled at the way national macroeconomic policies have been conducted, with more emphasis on the unprecedented high level of unemployment experienced by virtually all EU countries. A theoretical exploration of this new policy orientation is being pursued in an attempt to unveil a potential mechanism responsible for the dire employment record. This paper’s primary aim is to gain an empirical insight into, a somehow forgotten, relationship between capital stock and unemployment. The conducted econometric analysis provides useful empirical results, which support the relevant literature and argues in favour of implementing an alternative, macroeconomic policy in the EU