Marx on absolute and relative wages

The aim of this paper is to clarify some aspects of Marx's analysis of the determinants of wages and of the peculiarities of labour as a commodity, concentrating upon three related issues. The first is that of Marx's notion of the subsistence (or natural) wage rate: subsistence wage will be shown to stem, according to Marx, from socially determined conditions of reproduction of an efficient labouring class. The second issue refers to the distinction between the natural and the market wage rate that can be found in Marx, and his critique of Ricardo's analysis of the determinants of the price of labour. Finally, Marx's analysis of the effects of technical progress on both absolute and relative wages will be considered, also relating it back to the long-standing debate on the Marxian law of the falling rate of profit.Marx; subsistence wage; wages and productivity; Marxian law of the falling rate of profit

A remark on the supposed equivalence between complete markets and perfect foresight hypothesis

We consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. We show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets.Arrow-Debreu equilibrium, Complete markets, Sequential equilibrium, Perfect foresight, Indeterminacy

Marx on absolute and relative wages

The aim of this paper is to clarify some aspects of Marx's analysis of the determinants of wages and of the peculiarities of labour as a commodity, concentrating upon three related issues. The first is that of Marx's notion of the subsistence (or natural) wage rate: subsistence wage will be shown to stem, according to Marx, from socially determined conditions of reproduction of an efficient labouring class. The second issue refers to the distinction between the natural and the market wage rate that can be found in Marx, and his critique of Ricardo's analysis of the determinants of the price of labour. Finally, Marx's analysis of the effects of technical progress on both absolute and relative wages will be considered, also relating it back to the long-standing debate on the Marxian law of the falling rate of profit

An initial 'Keynesian illness'? Friedman on taxation and the inflationary gap

This paper examines Friedman’s writings in the years 1941-1943 and compares them with those after the war with a view to assessing differences and similarities. Albeit a first assessment, Friedman’s “Keynesian illness” in his ‘Washington phase’ will appear to have been less ‘serious’ and deep than he himself feared

Marx on absolute and relative wages

The aim of this paper is to clarify some aspects of Marx's analysis of the determinants of wages and of the peculiarities of labour as a commodity, concentrating upon three related issues. The first is that of Marx's notion of the subsistence (or natural) wage rate: subsistence wage will be shown to stem, according to Marx, from socially determined conditions of reproduction of an efficient labouring class. The second issue refers to the distinction between the natural and the market wage rate that can be found in Marx, and his critique of Ricardo's analysis of the determinants of the price of labour. Finally, Marx's analysis of the effects of technical progress on both absolute and relative wages will be considered, also relating it back to the long-standing debate on the Marxian law of the falling rate of profit

The causal relationship between short- and long-term interest rates: an empirical assessment of the United States

This paper addresses one of the central aspects of the transmission mechanism of monetary policy, namely the ability of central banks to affect the structure of interest rates. To shed light on this issue, we assess the causal relationship between short- and long-term interest rates, that is, the Effective Federal Funds Rate (FF), the Moody's Seasoned Aaa Corporate Bond Yield (AAA), and the 10-Year Treasury Constant Maturity Rate (GB10Y). We apply Structural Vector Autoregressive (SVAR) models to monthly data provided by the Federal Reserve Economic Data (FRED). Our findings – estimated for the 1954-2018 period – outline an asymmetry in the relationship between short- and long-term interest rates. In particular, although we found a bidirectional relationship when the 10-year treasury bond GB10Y was included as the long-run rate, a unidirectional relationship that moves from short- to long-term interest rates is estimated when the interest rate on corporate bonds ranked AAA is taken into consideration. Furthermore, the conclusions drawn by the impulse response functions (IRFs) are confirmed and strengthened by the Forecast Error Variance Decomposition (FEVD) which shows that monetary policy is able to permanently affect long-term interest rates over a long temporal horizon, i.e., not only in the short run but also in the long run. In this way, following the Keynesian tradition, long-term interest rates appear to be strongly influenced by the central bank. Finally, despite the fact that the Federal Fund rate (FF) is weakly affected by long-term interest rate shocks, the estimated FEVD shows that FF is mainly determined by its own shock allowing us to assume that the central bank has a certain degree of freedom in setting the levels of short-run interest rates

The money creation process: A theoretical and empirical analysis for the US

The aim of this paper is to assess – on both theoretical and empirical grounds – the two main views regarding the money creation process,namely the endogenous and exogenous money approaches. After analysing the main issues and the related empirical literature, we will apply a VAR and VECM methodology to the United States in the period 1959-2016 to assess the causal relationship between a number of critical variables that are supposed to determine the money supply, i.e., the monetary base, bank deposits and bank loans. The empirical analysis carried out supports several propositions of the endogenous money approach. In particular, it shows that for the United States in the years 1959-2016 (i) bank loans determine bank deposits and (ii) bank deposits in turn determine the monetary base. Our conclusion is that money supply is mainly determined endogenously by the lending activity of commercial banks

The causal relationship between short- and long-term interest rates: an empirical assessment of the United States

This paper addresses one of the central aspects of the transmission mechanism of monetary policy, namely the ability of central banks to affect the structure of interest rates. To shed light on this issue, we assess the causal relationship between short- and long-term interest rates, that is, the Effective Federal Funds Rate (FF), the Moody's Seasoned Aaa Corporate Bond Yield (AAA), and the 10-Year Treasury Constant Maturity Rate (GB10Y). We apply Structural Vector Autoregressive (SVAR) models to monthly data provided by the Federal Reserve Economic Data (FRED). Our findings – estimated for the 1954-2018 period – outline an asymmetry in the relationship between short- and long-term interest rates. In particular, although we found a bidirectional relationship when the 10-year treasury bond GB10Y was included as the long-run rate, a unidirectional relationship that moves from short- to long-term interest rates is estimated when the interest rate on corporate bonds ranked AAA is taken into consideration. Furthermore, the conclusions drawn by the impulse response functions (IRFs) are confirmed and strengthened by the Forecast Error Variance Decomposition (FEVD) which shows that monetary policy is able to permanently affect long-term interest rates over a long temporal horizon, i.e., not only in the short run but also in the long run. In this way, following the Keynesian tradition, long-term interest rates appear to be strongly influenced by the central bank. Finally, despite the fact that the Federal Fund rate (FF) is weakly affected by long-term interest rate shocks, the estimated FEVD shows that FF is mainly determined by its own shock allowing us to assume that the central bank has a certain degree of freedom in setting the levels of short-run interest rates

A remark on the supposed equivalence between complete markets and perfect foresight hypothesis

We consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. We show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets

A remark on the supposed equivalence between complete markets and perfect foresight hypothesis

We consider a sequential equilibrium model over two periods, during the first of which agents have perfect information and their expectations are formed as if there were complete future markets. We show that, in the second period, equilibrium prices may well be different from those expected, without any unexpected change having occurred. This result highlights a lack of correspondence between the perfect foresight hypothesis and that of complete markets