Professor McCombie has provided a thoughtful response to my previous argument about a potential near-tautology in conventional empirical tests of Thirlwall’s law. I accept his characterization of the argument as requiring that the estimated equations must be equivalent to ‘regressions through the origin,’ which could perhaps be called a ‘statistical coincidence’ if one does not like the term ‘near-tautology.’ More importantly, tests for equality between the balance-of-payments equilibrium growth rate and the long-run average growth rate do not directly test for the adjustment mechanism that occurs in response to balance-of-payments disequilibria. Other statistical methods as well as the use of ‘historical-structural analysis’ are needed to identify whether the main adjusting variable is national income or relative prices. This Reply also defends the way balance-of-payments–constrained growth was modeled in my co-authored work with Carlos Ibarra and highlights our use of the historical-structural approach applied to Mexico.
{"title":"On empirical tests of Thirlwall’s law: a reply to Professor McCombie’s rejoinder","authors":"Robert A. Blecker","doi":"10.4337/roke.2023.03.07","DOIUrl":"https://doi.org/10.4337/roke.2023.03.07","url":null,"abstract":"Professor McCombie has provided a thoughtful response to my previous argument about a potential near-tautology in conventional empirical tests of Thirlwall’s law. I accept his characterization of the argument as requiring that the estimated equations must be equivalent to ‘regressions through the origin,’ which could perhaps be called a ‘statistical coincidence’ if one does not like the term ‘near-tautology.’ More importantly, tests for equality between the balance-of-payments equilibrium growth rate and the long-run average growth rate do not directly test for the adjustment mechanism that occurs in response to balance-of-payments disequilibria. Other statistical methods as well as the use of ‘historical-structural analysis’ are needed to identify whether the main adjusting variable is national income or relative prices. This Reply also defends the way balance-of-payments–constrained growth was modeled in my co-authored work with Carlos Ibarra and highlights our use of the historical-structural approach applied to Mexico.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46184745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Within the non-mainstream growth literature, the Neo-Kaleckian model is the only one that presents an endogenous capacity utilization in the long run. After systematizing the debate around recent contributions, presenting the baseline and extensions of the Neo-Kaleckian model and providing some notes on the normal rate of capacity utilization, I critically assess three recent alternatives that try to justify endogenous utilization in Neo-Kaleckian models. All these contributions present different theoretical and empirical shortcomings that should be addressed in order to substantiate their claims.
{"title":"Critical notes on some recent Neo-Kaleckian contributions on capacity utilization","authors":"S. J. Gahn","doi":"10.4337/roke.2023.03.01","DOIUrl":"https://doi.org/10.4337/roke.2023.03.01","url":null,"abstract":"Within the non-mainstream growth literature, the Neo-Kaleckian model is the only one that presents an endogenous capacity utilization in the long run. After systematizing the debate around recent contributions, presenting the baseline and extensions of the Neo-Kaleckian model and providing some notes on the normal rate of capacity utilization, I critically assess three recent alternatives that try to justify endogenous utilization in Neo-Kaleckian models. All these contributions present different theoretical and empirical shortcomings that should be addressed in order to substantiate their claims.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44055762","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents a set of growth and distribution models for open developing economies under different political economy regimes. These regimes give rise to different institutional frameworks which in turn shape macroeconomic outcomes. We focus on three cases: (1) a pure developmentalist state, (2) conflicting claims between workers and government, and (3) an open capital account under a Neoliberal coalition. The equilibrium growth rate is defined by the Balance-of-Payments (BOP) constraint. Cumulative causation à la Kaldor in periods in which the depreciation of the real exchange rate temporarily raises the equilibrium growth rate allows (under certain conditions) for a process of learning that transforms the income elasticity of exports and hence the BOP-constrained rate of growth in the long run. The model produces a variety of outcomes that explains some of the contradictory results reported in the empirical literature in terms of different constellations of power and institutions.
{"title":"Growth trajectories and political economy in a Structuralist open economy model","authors":"G. Porcile, Danilo Spinola, G. Yajima","doi":"10.4337/roke.2023.03.04","DOIUrl":"https://doi.org/10.4337/roke.2023.03.04","url":null,"abstract":"This paper presents a set of growth and distribution models for open developing economies under different political economy regimes. These regimes give rise to different institutional frameworks which in turn shape macroeconomic outcomes. We focus on three cases: (1) a pure developmentalist state, (2) conflicting claims between workers and government, and (3) an open capital account under a Neoliberal coalition. The equilibrium growth rate is defined by the Balance-of-Payments (BOP) constraint. Cumulative causation à la Kaldor in periods in which the depreciation of the real exchange rate temporarily raises the equilibrium growth rate allows (under certain conditions) for a process of learning that transforms the income elasticity of exports and hence the BOP-constrained rate of growth in the long run. The model produces a variety of outcomes that explains some of the contradictory results reported in the empirical literature in terms of different constellations of power and institutions.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44318728","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Blecker (2021) repeats an argument, first put forward by McCombie (1981) (but later repudiated by him) and also summarised by Blecker (2016, 2021) that the traditional test of Thirlwall’s law is merely estimating what Blecker terms a ‘near-tautology’ or ‘near-identity’. This is based on an analysis concerning the arithmetical calculation of the import and export income elasticities of demand, and the circumstances under which these will equal their statistical estimates. The arithmetically calculated income elasticities are the growth of imports divided by the growth of domestic income and the growth of exports divided by the growth of world income, respectively. Blecker’s argument is that if the statistical estimates of the two income elasticities of demand equal their respective arithmetically calculated values, and are used in the testing of the law, this represents a near-tautology. This rejoinder demonstrates that Blecker’s argument concerning the near-tautology is a misinterpretation of the nature of the traditional testing of Thirlwall’s law. It is shown that Blecker and Ibarra’s (2013) alternative model, which is used to test the balance-of-payments constrained model for Mexico and which it is claimed avoids the putative near-tautology problem, is itself problematic. As such, it does not represent an improvement over the traditional model of Thirlwall’s law, but, ironically, may give approximately the same empirical result.
{"title":"Why the conventional test of Thirlwall’s law is still not a ‘near-tautology’: a rejoinder to Professor Blecker","authors":"J. Mccombie","doi":"10.4337/roke.2023.03.06","DOIUrl":"https://doi.org/10.4337/roke.2023.03.06","url":null,"abstract":"Blecker (2021) repeats an argument, first put forward by McCombie (1981) (but later repudiated by him) and also summarised by Blecker (2016, 2021) that the traditional test of Thirlwall’s law is merely estimating what Blecker terms a ‘near-tautology’ or ‘near-identity’. This is based on an analysis concerning the arithmetical calculation of the import and export income elasticities of demand, and the circumstances under which these will equal their statistical estimates. The arithmetically calculated income elasticities are the growth of imports divided by the growth of domestic income and the growth of exports divided by the growth of world income, respectively. Blecker’s argument is that if the statistical estimates of the two income elasticities of demand equal their respective arithmetically calculated values, and are used in the testing of the law, this represents a near-tautology. This rejoinder demonstrates that Blecker’s argument concerning the near-tautology is a misinterpretation of the nature of the traditional testing of Thirlwall’s law. It is shown that Blecker and Ibarra’s (2013) alternative model, which is used to test the balance-of-payments constrained model for Mexico and which it is claimed avoids the putative near-tautology problem, is itself problematic. As such, it does not represent an improvement over the traditional model of Thirlwall’s law, but, ironically, may give approximately the same empirical result.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48395999","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Book review: Charles J. Whalen, Reforming Capitalism for the Common Good: Essays in Institutional and Post-Keynesian Economics (Edward Elgar Publishing, Cheltenham, UK and Northampton, MA, USA 2022, ISBN 978-1-80392-628-5) 386 pp.","authors":"Jacob Powell","doi":"10.4337/roke.2023.03.08","DOIUrl":"https://doi.org/10.4337/roke.2023.03.08","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46500989","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Book review: Aleksandr V. Gevorkyan (ed.), Foreign Exchange Constraint and Developing Economies (Edward Elgar Publishing, Cheltenham, UK and Northampton, MA, USA 2023, ISBN 978-1-80088-049-8) 278 pp.","authors":"Terence M. Yhip","doi":"10.4337/roke.2023.03.09","DOIUrl":"https://doi.org/10.4337/roke.2023.03.09","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47929894","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Within the narrow but convenient framework of a pure Harrodian dynamics, the paper sheds new light on the macroeconomic textbook modelling with normal utilization in the steady state and the problem of Harrodian instability. To this end, it introduces interacting heterogeneity in the firms’ expectations about future demand. Specifically, the individual firms switch randomly between an optimistic and a pessimistic growth rate, where in the Harrodian spirit the transition probabilities vary with the utilization gap. Unlike the original aggregate analysis, this agent-based approach gives rise to the following three features at the macro level: (i) while the positive Harrodian feedback effects are basically maintained, there is also some scope for the steady state to be stable; (ii) persistent non-normal utilization in this state is not only possible but even the rule; and (iii) the paradox of thrift is re-established (the opposite relationship is true) if the steady state is stable (unstable). A calibration of the IS part provides for a reasonable order of magnitude of the investigated effects.
{"title":"Pure Harrodian dynamics: heterogeneous expectations and the loss of three established propositions","authors":"R. Franke","doi":"10.4337/roke.2023.03.02","DOIUrl":"https://doi.org/10.4337/roke.2023.03.02","url":null,"abstract":"Within the narrow but convenient framework of a pure Harrodian dynamics, the paper sheds new light on the macroeconomic textbook modelling with normal utilization in the steady state and the problem of Harrodian instability. To this end, it introduces interacting heterogeneity in the firms’ expectations about future demand. Specifically, the individual firms switch randomly between an optimistic and a pessimistic growth rate, where in the Harrodian spirit the transition probabilities vary with the utilization gap. Unlike the original aggregate analysis, this agent-based approach gives rise to the following three features at the macro level: (i) while the positive Harrodian feedback effects are basically maintained, there is also some scope for the steady state to be stable; (ii) persistent non-normal utilization in this state is not only possible but even the rule; and (iii) the paradox of thrift is re-established (the opposite relationship is true) if the steady state is stable (unstable). A calibration of the IS part provides for a reasonable order of magnitude of the investigated effects.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43075787","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Book review: James Crotty, Keynes Against Capitalism: His Economic Case for Liberal Socialism (Routledge, London, UK 2019) ISBN: 978-1138612846, 397 pp.","authors":"M. Vernengo","doi":"10.4337/roke.2023.02.08","DOIUrl":"https://doi.org/10.4337/roke.2023.02.08","url":null,"abstract":"","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-04-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48701729","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Central bankers are raising interest rates on the assumption that wage-push inflation may lead to stagflation. This is not the case. Although unemployment is low, the labour market is not ‘tight.’ On the contrary, we show that what matters for wage growth are the non-employment rate and the under-employment rate. Both are high and act as brakes on wage growth. By lowering already low levels of consumer confidence, higher interest rates are liable to exacerbate workers’ inability to maintain their real wages by reducing labour demand still further. Furthermore, we argue inflationary pressures have been generated by short-term supply side problems, rather than excessive demand in the economy. Under these conditions, just as in the Great Recession, we anticipate deflation in the near future, coupled with rising joblessness and recession.
{"title":"Recession and deflation?","authors":"David G. Blanchflower, Alex Bryson","doi":"10.4337/roke.2023.02.06","DOIUrl":"https://doi.org/10.4337/roke.2023.02.06","url":null,"abstract":"Central bankers are raising interest rates on the assumption that wage-push inflation may lead to stagflation. This is not the case. Although unemployment is low, the labour market is not ‘tight.’ On the contrary, we show that what matters for wage growth are the non-employment rate and the under-employment rate. Both are high and act as brakes on wage growth. By lowering already low levels of consumer confidence, higher interest rates are liable to exacerbate workers’ inability to maintain their real wages by reducing labour demand still further. Furthermore, we argue inflationary pressures have been generated by short-term supply side problems, rather than excessive demand in the economy. Under these conditions, just as in the Great Recession, we anticipate deflation in the near future, coupled with rising joblessness and recession.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134998381","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The current debate on the causes of inflation is dominated by a particular view of what caused the inflationary acceleration in the 1970s, the so-called Great Inflation. In this view, inflation is always and everywhere a demand phenomenon and requires contractionary monetary policy to be kept under control. The alternative view put forward by many heterodox authors emphasize what might be termed the oligopolistic view of inflation. In this paper, we trace the limitations of both views for the center and the periphery.
{"title":"Price and prejudice: reflections on the return of inflation and ideology*,**","authors":"M. Vernengo, Esteban Pérez Caldentey","doi":"10.4337/roke.2023.02.02","DOIUrl":"https://doi.org/10.4337/roke.2023.02.02","url":null,"abstract":"The current debate on the causes of inflation is dominated by a particular view of what caused the inflationary acceleration in the 1970s, the so-called Great Inflation. In this view, inflation is always and everywhere a demand phenomenon and requires contractionary monetary policy to be kept under control. The alternative view put forward by many heterodox authors emphasize what might be termed the oligopolistic view of inflation. In this paper, we trace the limitations of both views for the center and the periphery.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":"1 1","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-04-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42527382","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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