A Theory of Minsky Super-Cycles and Financial Crises

This paper argues that Hyman Minsky's financial instability hypothesis weaves together a medium term Keynesian approach to the business cycles in the spirit of Samuelson (1936) and Hicks (1950) with long cycle thinking of economists such as Schumpeter (1939) and Kondratieff. Post Keynesians have devoted considerable attention to the medium term dimension of Minsky's thinking. The current paper concentrates on the long swing dimension and introduces the idea of "Minsky super-cycles." It is the supercycle that ultimately permits financial crisis. Whereas financially driven business cycles occur every decade, financial crises occur over longer durations reflecting the longer phase of the super-cycle.Minsky, business cycles, financial instability hypothesis

The Backward Bending Phillips Curves: A Simple Model

This paper develops a simple macroeconomic model of the backward bending Phillips curve that allows easy comparison with the neo-Keynesian and new classical models of the Phillips curve. There are two separate explanations of the backward bending Phillips curve and the model incorporates both. One explanation focuses on near-rational inflation expectations and aggregation of expectations across workers. The other explanation focuses on nominal wage setting behavior and aggregation of nominal wage behavior across sectors. The paper concludes with some observations about the implications of the backward bending Phillips curve for monetary policy.Backward bending Phillips curve, minimum unemployment rate of inflation

Academic Freedom of the Faculty Member as Citizen

A hi-tech company often focuses on being innovative by providing product offerings as product leader, fast follower or with operational excellence. In the international calling sector the technological solutions are numerous. The providers are, for instance, normal telecom providers, Voice over Internet Protocol (VoIP) and Mobile virtual network operators (MVNO). This means that a company faces not only the competitors that offer the same solution but also from outside the company’s business sector. The company thus needs to tackle many challenges, such as fast-paced product development, market expansion, competitor volatility, at the same time as the company cultivates its brand assets. This study focuses on the branding strategy within the VoIP telecom sector. It aims to set a guideline for how companies, in particular in the VoIP telecom sectors, cultivate and enhance their brand identity in order to differentiate themselves from competitors as well as achieve a successful and sustainable level of brand equity. The thesis also studies the brand strategies that have already manifested themselves within the providers of international calling services, in particular VoIP providers and a couple of MVNO providers. By conducting the brand identity and brand equity analysis, customer analysis and competitors’ analysis, a company can make a decision on brand strategy that will further associate, differentiate, energize and support its brands. The research framework consists of both the corporate and consumer perspectives. It consists of brand theory, market research, competitor analysis and the company’s brand identity, as well as brand awareness analysis. The thesis presents the Swedish VoIP consumers’ behavior and trends, the guideline and case study on how a company bridges the gap between brand identity and brand equity as well as the guideline and case study of brand portfolio strategies that have been explored within the VoIP telecom sectors, i.e. VoIP branding

Inside Debt and Economic Growth: A Cambridge - Kaleckian Analysis

Inside debt is a fundamental feature of capitalist economies. This paper examines the growth effects of consumer and corporate debt using a Cambridge - Kaleckian growth framework. According to the Cambridge - Kaleckian model inside debt has an ambiguous effect on growth. This is counter to the intuition of static short-run macro models in which higher debt levels lower economic activity and shows intuitions derived from short run macroeconomics do not always carry over to growth theory. Growth is faster in endogenous money economies than in pure credit economies, ceteris paribus. That is because lending in endogenous money economies creates money wealth that increases spending and lowers saving. Interest payments from debtors to creditors are a critical channel whereby debt affects growth. In the consumer debt model this interest transfer mechanism exerts a negative influence on growth. However, in the corporate debt model the transfer can raise growth if the marginal propensity to consume of creditor households exceeds the marginal propensity to invest of firms.Growth, Debt, Interest transfers, Cambridge distribution theory, Kaleckian growth theory.

"Financialization: What It Is and Why It Matters"

Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic systems at both the macro and micro levels. Its principal impacts are to (1) elevate the significance of the financial sector relative to the real sector, (2) transfer income from the real sector to the financial sector, and (3) increase income inequality and contribute to wage stagnation. Additionally, there are reasons to believe that financialization may put the economy at risk of debt deflation and prolonged recession. Financialization operates through three different conduits: changes in the structure and operation of financial markets, changes in the behavior of nonfinancial corporations, and changes in economic policy. Countering financialization calls for a multifaceted agenda that (1) restores policy control over financial markets, (2) challenges the neoliberal economic policy paradigm encouraged by financialization, (3) makes corporations responsive to interests of stakeholders other than just financial markets, and (4) reforms the political process so as to diminish the influence of corporations and wealthy elites.

"The Economics of Outsourcing: How Should Policy Respond?"

According to Research Associate Thomas A. Palley, global outsourcing represents a new economic challenge that calls for a new set of institutions. In this brief, he expands upon the problems of offshore outsourcing as outlined in Public Policy Brief no. 86 and focuses on the microeconomic foundations. He argues that outsourcing is a central element of globalization that is best understood as a new form of competition. Palley urges policymakers to understand the economic basis of outsourcing in order to develop effective policies, and suggests that they focus on enhancing national competitiveness and establishing new rules that govern the nature of global competition.

Financialization: What it is and Why it Matters

Financialization is a process whereby financial markets, financial institutions and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic system at both the macro and micro levels. Its principal impacts are to (1) elevate the significance of the financial sector relative to the real sector; (2) transfer income from the real sector to he financial sector; and (3) increase income inequality and contribute to wage stagnation. Additionally, there are reasons to believe that financialization may render the economy prone to risk of debt-deflation and prolonged recession. Financialization operates through three different conduits: changes in the structure and operation of financial markets; changes in the behavior of non-financial corporations, and changes in economic policy. Countering financialization calls for a multi-faceted agenda that (1) restores policy control over financial markets, (2) challenges the neo-liberal economic policy paradigm encouraged by financialization, (3) makes corporations responsive to interests of stakeholders other than just financial markets, and (4) reforms the political process so as to diminish the influence of corporations and wealthy elites.Financialization, neo-liberal policy, deregulation, debt, financial fragility.

Financialization: What It Is and Why It Matters

Financialization is a process whereby financial markets, financial institutions and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic system at both the macro and micro levels. Its principal impacts are to (1) elevate the significance of the financial sector relative to the real sector; (2) transfer income from the real sector to the financial sector; and (3) increase income inequality and contribute to wage stagnation. There are reasons to believe that financialization may render the economy prone to risk of debt-deflation and prolonged recession. Financialization operates through three different conduits: changes in the structure and operation of financial markets; changes in the behavior of non-financial corporations, and changes in economic policy. Countering financialization calls for a multi-faceted agenda that (1) restores policy control over financial markets, (2) challenges the neo-liberal economic policy paradigm encouraged by financialization, (3) makes corporations responsive to interests of stakeholders other than just financial markets, and (4) reforms the political process so as to diminish the influence of corporations and wealthy elites.Financialization, neo-liberal policy, deregulation, debt, financial fragility

"After the Bust: The Outlook for Macroeconomics and Macroeconomic Policy"

"Change" was the buzzword of the Obama campaign, in response to a political agenda precipitated by financial turmoil and a global economic crisis. According to Research Associate Thomas Palley, the neoliberal economic policy paradigm underlying that agenda must itself change if there is to be a successful policy response to the crisis. Mainstream economic theory remains unreformed, says Palley, and he warns of a return to failed policies if a deep crisis is averted. Since Post Keynesians accurately predicted that the U.S. economy would implode from within, there is an opportunity for Post Keynesian economics to replace neoliberalism with a more successful approach. Palley notes that there is significant disagreement among economic paradigms about how to ensure full employment and shared prosperity. A salient feature of the neoliberal economy is the disconnect between wages and productivity growth. Workers are boxed in on all sides by globalization, labor market flexibility, inflation concerns, and a belief in “small government” that has eroded economic rights and government services. Financialization, the economic foundation of neoliberalism, serves the interests of financial markets and top management. Thus, reversing the neoliberal paradigm will require a policy agenda that addresses financialization and ensures that financial markets and firms are more closely aligned with the greater public interest.

The Troubling Economics and Politics of Paying Interest on Bank Reserves: A Critique of the Federal Reserve’s Exit Strategy

The Federal Reserve has recently activated its newly acquired powers to pay interest on reserves of depository institutions. The Fed maintains its new policy increases economic efficiency and intends it to play a lead role in the exit from quantitative easing. This paper argues it is a bad policy that (1) has a deflationary bias; (2) is costly to taxpayers and that cost will increase as normal conditions return; and (3) establishes institutional lock-in that obstructs desirable changes to regulatory policy. The paper recommends repealing the Fed’s power to pay interest on bank reserves. Second, the Fed should repeal regulation Q that prohibits payment of interest on demand deposits. Third, the Fed should immediately implement an alternative system of asset based reserve requirements (liquidity ratios) that will improve monetary control and can help exit quantitative easing at no cost to the public purse. Now is the optimal time for this change. Lastly, the paper argues the new policy of paying interest on reserves reveals the troubling political economy governing the actions of the Federal Reserve and policy recommendations of the economics profession.Interest on reserves, asset based reserve requirements, liquidity ratios