175 research outputs found
Interest rate, debt, distribution and capital accumulation in a post-Kaleckian model
The introduction of monetary variables into post-Keynesian models of distribution and growth is an ongoing process. Lavoie (1995) has proposed a Kaleckian ?Minsky-Steindl-model? of distribution and growth, incorporating the effects debt and debt services have on short and long run capital accumulation. This attempt, however, can be extended because neither has the rate of capacity utilisation been endogenously determined, nor have the potential effects of interest rate variations on distribution between wages and gross profits explicitly been incorporated in the model. In the present paper we therefore augment Lavoie?s ?Minsky-Steindl-model?, building our analysis on a Kaleckian distribution and growth model which has already taken into account distribution effects of interest rate variations on the short run equilibrium. Into this model the effects of debt and debt services are explicitly introduced, the effects of interest rate variations on the short and the long run equilibrium are derived, and the results are compared to those of Lavoie?s ?Minsky-Steindl-model?. It is shown, that the effects of interest variations on the endogenously determined equilibrium values of the model do not only depend on the parameter values in the savings and investment functions but also on initial conditions with respect to the interest rate and the debt-capital-ratio. --Interest rate,debt,distribution,capital accumulation
Monetary Policy and Wage Bargaining in the EMU: Restrictive ECB Policies, High Unemployment, Nominal Wage Restraint and Rising Inflation
Assessing the effects of monetary policy and wage bargaining on employment and inflation in the European Monetary Union (EMU), in the first step a Post-Keynesian competitive claims model of inflation with endogenous money is developed. In this model the NAIRU is considered to be a short-run limit to employment enforced by independent and conservative central banks. In the long run, however, the NAIRU will follow actual unemployment and is therefore also dependent on the forces determining aggregate demand, including monetary policies. But the NAIRU may also be reduced by effectively co-ordinated wage bargaining as has been shown by institutional political economists. Applying these considerations to the economic performance of the EMU, different scenarios determined by wage bargaining co-ordination and the European Central Bankâs (ECB) monetary policies are developed. It is shown that the first phase of EMU was dominated by uncoordinated wage bargaining across EMU and an âanti-growth-biasâ of the ECB. Therefore, the Euro area was plagued with nominal wage restraint, high unemployment and rising inflation. Economic performance will improve if the ECB abandons its asymmetric monetary strategy. This may be facilitated by a higher degree of effective wage bargaining co-ordination across EMU.European Monetary Union, monetary policy, wage bargaining, inflation and employment
On the (in-)stability and the endogeneity of the "normal" rate of capacity utilisation in a post-Keynesian/Kaleckian "monetary" distribution and growth model
In Kaleckian models of distribution and growth the equilibrium rate of capacity utilisation may persistently diverge from the ânormal rateâ of utilisation. We assess this problem following the approach by Dumenil/Levy (1999) who consider the ânormal rateâ of utilisation in a monetary production economy as the rate which is associated with price stability. Since inflation in our model is driven by distribution conflict, the ânormal rateâ of utilisation is associated with consistent claims of firms and employees. Taking into account real debt effects of changes in inflation and distribution effects of monetary policy interventions we discuss the short-run stability of the ânormal rateâ and address the issue of long-run endogeneity. Generally, we show that in a Kaleckian monetary distribution and growth model, which takes the major features of a credit economy seriously, the ânormal rateâ of capacity utilisation is endogenous to distribution conflict and monetary policy intervention in the long run. And we also show that major Kaleckian results, in particular the paradox of costs, can be retained for the short and the long run.distribution, growth, capacity utilisation, inflation, monetary policy
âFinancialisationâ, distribution, capital accumulation and productivity growth in a Post-Kaleckian model
Focussing on the long-run effects of âfinancialisationâ and increasing shareholder power in a simple Post-Kaleckian endogenous growth model, we examine the effects of increasing shareholder power on the demand regime, on the productivity regime, and on the overall regime of the model. Under special conditions increasing shareholder power may have positive effects on capital accumulation and productivity growth and hence on potential growth of the economy. However, such a regime does not only require directly positive â or under certain conditions only weakly negative â effects of increasing shareholder power on the productivity regime. It also requires expansive â or under special circumstances only weakly contractive â effects of increasing shareholder power on capital accumulation via the demand regime of the economy. Both conditions have recently been questioned on empirical grounds, so that an overall long-run âcontractiveâ regime seems to be the most likely outcome of âfinancialisationâ, rising shareholder power and pronounced shareholder value orientation.Financialisation; distribution; capital accumulation; productivity growth; Kaleckian model
Money, interest, and capital accumulation in Karl Marx's economics: A monetary interpretation
Starting from Schumpeter.s important distinction between .real analysis. and .monetary analysis., in this paper it is shown that major elements of Marx.s economic theory fall in the camp of monetary analysis and the implications for Marx.s theory of capital accumulation are derived. First, Marx.s theory of labour value has to be considered a .monetary theory of value. because .abstract labour. as the social substance of value cannot be measured without a social standard of value. Money as a social representative of value, therefore, is introduced at the very beginning of Marx.s microeconomics. Marx.s rejection of Ricardo.s interpretation of Say.s Law requires that money as a means of circulation and as a means of payment is nonreproducible and therefore cannot be a commodity. Second, in the schemes of reproduction it becomes clear, that the realisation of profits for the capitalist class as a whole requires money advances, which have to increase by means of rising credit in a growing economy. Third, the rate of interest in Marx.s economics is conceived of as a monetary category determined by relative powers of financial and industrial capitalists. Therefore, similar to post-Keynesian theories of distribution and growth, the rate of capital accumulation is determined by the expected rate of profit and the exogenous rate of interest. From this it follows, that any .real theory. of crisis and stagnation, as the falling rate of profit theory of crisis, cannot be sustained within Marx.s monetary analysis. --Money,interest,capital accumulation,Marx's economics
Interest, debt and capital accumulation - a Kaleckian approach
In the present paper we explicitly introduce interest payments and debt into a Kaleckian distribution and growth model with an investment function very close to Kaleckiâs original writings. The effects of interest rate variations on the short-run equilibrium values of capacity utilisation, capital accumulation and the rate of profit are derived, and the long run effects on the equilibrium debt-capital-ratio are also analysed. It is shown, that the effects of interest variations on the endogenously determined equilibrium values of the model do not only depend on the parameter values in the saving and investment functions but also on the interest elasticity of distribution and in some cases on initial conditions with respect to the interest rate and the debt-capital-ratio. If the conditions for short-run ânormalâ effects of interest rate variations are given, the economy will be characterised by a long-run unstable debt-capital-ratio and by the macroeconomic âparadox of debtâ. These results are similar to other models and hint to the robustness of Kaleckian âmonetaryâ models of distribution and growth with respect to the specification of the investment function.Interest rate, debt, capital accumulation, Kaleckian model
Wage bargaining and monetary policy in a Kaleckian monetary distribution and growth model: trying to make sense of the NAIRU
In a Kaleckian monetary distribution and growth model with conflict inflation we assess the role of a Non Accelerating Inflation Rate of Unemployment (NAIRU). The short run stability of a NAIRU is examined taking into account real debt effects of accelerating and decelerating inflation, and the short run effectiveness of monetary policy interventions applying the interest rate tool is analysed. The problem of long run endogeneity of the NAIRU is addressed integrating the long run distribution effects of monetary policiesâ real interest rate variations into the model. It is concluded that monetary policy interventions in order to stabilise inflation are either unnecessary or costly in terms of employment in the short run. In the long run, these policies bear the risk of continuously increasing the NAIRU in order to keep inflation under control, which yields a horizontal long run Phillips-curve and latent stagflation. Instead of relying on monetary policies, the cause of inflation should be directly addressed and wage bargaining co-ordination should be applied as an appropriate tool.Monetary policy, wage bargaining, inflation, distribution, growth
Institutions and Macroeconomic Performance: Central Bank Independence, Labour Market Institutions and the Perspectives for Inflation and Employment in the European Monetary Union
Starting from a Post-Keynesian model in which employment is determined by effective deÂŹmand and the NAIRU is viewed as a limit to employment, enforced by monetary policy reÂŹacting upon conflict inflation, the effects of central bank independence and labour market institutions on macroeconomic performance are considered and the perspectives for employÂŹment and inflation in the European Monetary Union are discussed. Central bank independÂŹence seems to be associated with stable prices and to prevent the rate of unemployment from falling below the NAIRU. But price stability also depends on labour market institutions. Horizontally and vertically co-ordinated wage bargaining allows for a considerable reduction of the NAIRU and hence of the real costs of price stability. Therefore, the perspectives for employment and inflation in the European Monetary Union depend on the development of the degree of co-ordination of wage bargaining and on the monetary strategy chosen by the indeÂŹpendent European Central Bank. Different scenarios derived from these determinants are fiÂŹnally discussed.Central independence; labour market institutions; inflation; employment; European Monetary Union
Financialisation in a comparative static, stock-flow consistent Post-Kaleckian distribution and growth model
Into an analytical stock-flow consistent Post-Kaleckian distribution and growth model the following transmission channels of 'financialisaton' are integrated. 1. 'Financialisation' is assumed to affect distribution between firms and rentiers in the short run, and distribution between capital and labour through a dividend-elastic mark-up in firms' price setting in the medium run. 2. Firms' investment is affected through a 'management's preference channel' and an 'internal means of finance channel'. 3. Consumption is influenced via distribution of dividends in the short run and via a reduction in the labour income share in the medium run. In the model the total effect of 'financialisation' is derived, the development of firms' outside finance-capital ratio is endogenised, and the medium-run stability and viability of the financial structure and of capital accumulation is checked.'Financialisation', distribution, growth, instability, Post-Kaleckian model
Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model
In a Kaleckian distribution and growth model with workersâ debt we examine the short- and long-run effects of three stylized facts of âfinance-dominated capitalismâ: a fall in animal spirits of the firm sector with respect to real investment in capital stock, re-distribution of income at the expense of the wage share, and increasing lending of rentiers to workers for consumption purposes. In particular, we specify the conditions for long-run stability of the workersâ debt-capital ratio. We thus identify the threshold for this ratio to turn unstable causing increasing financial fragility and finally financial crisis due to systemic stock-flow or stock-stock dynamics.Finance-dominated capitalism, distribution, household debt, financial fragility, growth, Kaleckian model
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