Working Papers
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Grantee paper
Minsky Financial Instability, Interscale Feedback, Percolation and Marshall-Walras Disequilibrium
Mar 2014
We study analytically and numerically Minsky instability as a combination of top-down, bottom-up and peer-to-peer positive feedback loops.
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Conference paper
Debt Restructuring versus Monetary Easing: The Eurozone Experiment
Mar 2014
Since the outbreak of the Greek debt crisis at the end of 2009, the Eurozone finds itself in an unprecedented debt crisis.
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Working Paper Series
Crisis and Recovery in the German Economy: The Real Lessons
Mar 2014
Owing to its strong dependence on exports, Germany was among the economies hit hardest by the financial crisis.
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Grantee paper
Greenhouse Gas and Cyclical Growth
Feb 2014
A growth model incorporating dynamics of capital per capita, atmospheric CO2 concentration, and labor and energy productivity is described.
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Grantee paper
Varieties of Keynesianism
Feb 2014
Recent claims, particularly in Paul Krugman’s column and blog, on the superiority of the Hicks-Modigliani version of Keynesian economics calls for a re-thinking of the issues raised in the early controversies over what Joan Robinson called “bastard Keynesianism”.
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Working Paper Series
Sovereigns versus Banks: Credit, Crises and Consequences
Feb 2014
Two separate narratives have emerged in the wake of the Global Financial Crisis. One interpretation speaks of private financial excess and the key role of the banking system in leveraging and deleveraging the economy. The other emphasizes the public sector balance sheet over the private and worries about the risks of lax fiscal policies. However, the two may interact in important and understudied ways.
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Working Paper Series
Unemployment and Innovation
Jan 2014
This paper analyzes equilibrium, dynamics, and optimal decisions on the factor bias of innovation in a model of induced innovation.
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Conference paper
Income Distribution and the Current Account: A Sectoral Perspective
Dec 2013
We analyse the link between income distribution and the current account for the period 1972-2007. We find that rising (top-end) personal inequality leads to a decrease of the current account, ceteris paribus.
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Grantee paper
Inequality, Financialization, and the Growth of Household Debt in the U.S., 1989-2007
Nov 2013
Household indebtedness in the United States grew dramatically during the decades leading up to the financial crisis.
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Grantee paper
Income Distribution and Current Account Imbalances
Oct 2013
We develop a three-country, stock-flow consistent macroeconomic model to study the effects of changes in both personal and functional income distribution on national current account balances.
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Conference paper
The Two Innovation Economies: Follower and Frontier
Sep 2013
Can China lead the way on innovation?
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Grantee paper
Where Did All the Money Go? Stimulus in Fact and Fantasy
Jul 2013
The Obama stimulus remains controversial even as we approach the fourth anniversary of its launch.
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Grantee paper
From Green Users to Green Voters
Jun 2013
We estimate the effect of the diffusion of photovoltaic (PV) systems on the fraction of votes obtained by the German Green Party.
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Conference paper
GWAS of 126,559 Individuals Identifies Genetic Variants Associated with Educational Attainment
May 2013
A genome-wide association study (GWAS) of educational attainment was conducted in a discovery sample of 101,069 individuals and a replication sample of 25,490. Three independent single-nucleotide polymorphisms (SNPs) are genome-wide significant (rs9320913, rs11584700, rs4851266), and all three replicate.
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Grantee paper
Technology Diffusion: Measurement, Causes and Consequences
Apr 2013
This chapter discusses different approaches pursued to explore three broad questions related to technology diffusion: what general patterns characterize the diffusion of technologies, and how have they changed over time; what are the key drivers of technology, and what are the macroeconomic consequences of technology.
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Conference paper
Central Banks in Balance Sheet Recessions: A Search for Correct Response
Apr 2013
These are extraordinary times for central banks. Near zero interest rates and massive liquidity injections are still failing to bring life back to so many economies in the developed world.
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Conference paper
New Metrics for Economic Complexity: Measuring the Intangible Growth Potential of Countries
Apr 2013
In this paper we provide a summary and a guide to the literature for a new line of research which goes under the name of Economic Complexity and is partly performed incollaboration with INET.
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Conference paper
Economics and the Powerful: Faulty Analysis, Economic Advice, and the Imperatives of Power
Apr 2013
“Look! Up there in the sky! What is it? Is it a plane? Is it a bird?” No, it’s a distraction from the robbery that is taking place in broad daylight on the ground.
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Conference paper
Toward a Supply-Side Theory of Financial Innovation
Apr 2013
Innovation. The word is evocative of ideas, products and processes which have somehow made the world a better place. Prior to the global financial crisis, many viewed financial innovation as unequivocally falling into this category.
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Conference paper
The Future of Central Banking
Apr 2013
The exteriors of major central banks may be solid marble and doric columns, but, inside, monetary policy remains a work in progress.
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Conference paper
Poles Apart? Party Polarization and Industrial Structure in American Politics Now
Apr 2013
Only a few years ago, comparisons of American politics to opéra bouffe were not outrageously farfetched at least if you were not poor or sick.
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Conference paper
Austerity, Polarity and the Prospect of Regime Change: China
Apr 2013
Since the dawn of this millennium, and long before the current financial turmoil and the subsequent bitter pill of austerity therapy hit the Untied States and the European Union, the Chinese Communist Government has publicly recognized the monumental challenge of polarity.
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Conference paper
Assessing Development
Apr 2013
There are a number of possible purposes in assessing the level of economic development of a country or part of a country. The assessment may provide an incentive for better development, particularly if it can be compared meaningfully with assessments for other countries.
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Conference paper
Domestic Rebalancing to Reduce Global Imbalances: The Role of Financial Market Measures
Apr 2013
“Taking advantage of the opportunity offered by the structural adjustments of the global economy…”The decisions on the four modernisations taken at the Third Plenum represented a radical change in Chinese domesticdevelopment strategy.
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Conference paper
Meritocracy Is a Good Thing
Apr 2013
Political meritocracy is the idea that a political system is designed with the aim of selecting political leaders with above average ability to make morally informed political judgments. That is, political meritocracy has two key components: (1) the political leaders have above average ability and virtue and (2) the selection mechanism is designed to choose such leaders.
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Conference paper
Irreducible Uncertainty and its Implications: A Narrative Action Theory for Economics.
Apr 2013
At the heart of economics is a theory of action. It reflects views about how human beings make economic decisions and leads to an analysis of aggregate consequences.
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Conference paper
A Keynes-IKE Model of Currency Risk: A CVAR Investigation
Apr 2013
A core puzzle in Önancial economics is the inability of standard risk-premium models to account for excess returns in currency and other asset markets.
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Conference paper
Market Psychology, Animal Spirits and Reflexivity
Apr 2013
Neoclassical economics has abolished the role of psychology in decision making by assuming that all individuals are rational optimizers with rational expectations about future events.
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Conference paper
The Law-Finance Paradox
Apr 2013
The global financial crisis led to the rediscovery of ‘fundamental uncertainty’. Incorporating uncertainty into the analysis of financial markets alters our understanding of how these markets operate and expose the two-faced role of law in finance.
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Conference paper
Rationality and the Meese and Rogoff Exchange-Rate-Disconnect Puzzle: Learning vs. Contingent Knowledge
Apr 2013
There is much anecdotal evidence in the popular media, backed up by survey research, that participants in currency markets pay close attention to fundamental economic variables in forming their forecasts of future exchange rates.
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Conference paper
The Contingent Expectations Hypothesis: Rationality and Contingent Knowledge in Macroeconomics and Finance Theory
Apr 2013
For macroeconomists, an individual is rational if she uses her understanding of the way the economy works in making decisions that do not conflict with her objectives.
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Conference paper
Rationality in the Present-Value Model of Stock Prices: Fundamentals, Psychology, and Structural Change
Apr 2013
The present-value model of stock prices is a workhorse in financial economics. The model relates today’s price of a stock (or a basket of stocks) to the market’s forecasts of next-period’s price and dividend, appropriately discounted.
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Conference paper
Forward-Rate Bias, Contingent Knowledge, and Risk: Evidence from Developed and Developing Countries
Apr 2013
In this paper, we examine one of the core puzzles in International Macroeconomics, the so-called “forward-discount anomaly.”
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Conference paper
The Econometrics of Imperfect Knowledge Economics
Apr 2013
A core premise of contemporary economic models is that researchers can adequately specify in probabilistic terms how individuals alter the way they make decisions and how the processes underpinning market outcomes unfold over time.
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Conference paper
Expectational coordination failures and Market outcomes’ volatility
Apr 2013
The first part of this text comes back on the standard economic viewpoint on expectational coordination, a viewpoint that the recent events have challenged.
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Conference paper
The State, the Market and the Rule of Law
Apr 2013
State and market are often depicted as distinct, even antagonistic. Markets appear as natural products of spontaneous ordering; states as leviathans that if left untamed will distort, if not destroy markets’ natural state.
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Conference paper
Endogenising Uncertainty
Apr 2013
Uncertainty is an unavoidable feature of economic life, although we may cope with it sometimes by ignoring it. Institutions, conventions and behaviour are all conditioned by uncertainty, and they in turn condition uncertainty in a reflexive manner.
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Conference paper
Addressing the Crisis in the Euro Zone System
Apr 2013
The reason why the Euro zone crisis has dragged on for so long is that Europe’s leaders have focused too much on short-term measures to patch up the emergency of the moment, rather than formulating a comprehensive plan.
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Conference paper
Towards a New Monetary Constitution in Europe: The Proposal of the German Council of Economic Experts (GCEE)
Apr 2013
After the announcement of Mario Draghi, the ECB president, to do “whatever it takes” to preserve the integrity of the European Monetary Union (EMU) in July 2012 and the establishment of the Outright Monetary Transactions (OMT) program in September 2012, the crisis of EMU is far from being resolved.
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Conference paper
Is Mercantilism Doomed to fail? China, Germany, and Japan and The Exhaustion of Debtor Countries
Apr 2013
Mercantilism, Accumulation of Foreign Exchange Reserves, and RMB Internationalization
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Conference paper
Surveillance, Regulation and Supervision -a solution for the euro?
Apr 2013
Regulation and supervision of banks and financial markets are now upgraded in the euro area. Surveillance of macroeconomic performance of all EU countries is also intensified.
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Conference paper
If Not Now, When? Financial Reform Must Not Await Another Crisis
Apr 2013
In the first ten chapters of our book, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It, we discuss banking and the economics of funding as it applies to banks.
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Conference paper
The European Tragedy: What Way Out?
Apr 2013
Europe can choose its musical accompaniment. In Berlin, 50 Cent’s All Things Fall Apart has just had its premiere. Or go back to Giuseppe Verdi, born two hundred years ago.
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Conference paper
Renminbi Internationalization: Tempest in a Teapot?
Apr 2013
Internationalization of the renminbi is a stated goal of the Chinese government, its brief flirtation with Special Drawing Rights and an Asian Currency Unit notwithstanding. Chinese officials understand that a dollar-centric international monetary and financial system is a mixedblessing.
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Conference paper
Something for Everyone: Building Incentives for Innovation Ecosystems
Apr 2013
Healthy innovation economies are the main driver of prosperity in the 21st century. But the three players that have traditionally sponsored basic research and invention in those economies are no longer willing or able to perform that role.
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Conference paper
Scarcity, Preferences and Cooperation: A Mimetic Analysis
Apr 2013
In “The Ambivalence of Scarcity” which is my contribution to L’Enfer des choses. René Girard et la logique de l’économie, written by Jean-Pierre Dupuy and originally published in French in 1978, I attempt to apply mimetic theory to modern economics and to economicphenomena, and also to explain why economic issues and economics as a discipline occupy such an important place in the modern world.
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Conference paper
Monetary and Financial Stability: Lessons from the Crisis and from classic economics texts
Apr 2013
My remarks today will be focused primarily on features of the developed world’s financial system which led to the crisis of 2008 and to the Great Recession that followed, from which we are only slowly and painfully emerging.
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Conference paper
Comments by William White on the Presentation by Lord Adair Turner
Apr 2013
In his recent lecture at the Cass Business School, Lord Turner noted that even mentioning the possibility of overt monetary financing was akin to breaking a taboo.
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Conference paper
David Sainsbury: Innovation Systems
Apr 2013
A striking feature of the neoclassical economic theory which has been dominant in Western universities in recent years is that it has had so little to say about innovation and innovation policy which is useful for policy-makers.
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Conference paper
Crisis and the Sacred
Apr 2013
It would be nonsensical to blame economists for not foreseeing the crisis; even less for causing it. It was obvious there would be a crisis. It was impossible to foresee how it would start and evolve, and at what moment these events would occur.
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Conference paper
Individual Judgments, Social Values, and Mimetic Interactions
Apr 2013
The problem of value has always occupied a central place in economic thought and debate.
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Grantee paper
If Technology Has Arrived Everywhere, Why Has Income Diverged?
Mar 2013
We study the lags with which new technologies are adopted across countries, and their long-run penetration rates once they are adopted.
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Grantee paper
The Inevitability of Shadowy Banking
Mar 2013
Shadowy banking is safety-net arbitrage. It employs substitutes for products and activities performed within the traditional banking sector.
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Grantee paper
Aggregate Demand, Instability, and Growth
Feb 2013
This paper considers a puzzle in growth theory from a Keynesian perspective.
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Journal article
Financialization and U.S. Income Inequality, 1970–2008
Feb 2013
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Grantee paper
Time Series Forecasting: Model Evaluation and Selection Using Nonparametric Risk Bounds
Nov 2012
We derive generalization error bounds — bounds on the expected inaccuracy of the predictions — for traditional time series forecasting models.
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Grantee paper
Conventions and the European Periphery
Nov 2012
The European periphery is qualitatively dierent from the core.
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Grantee paper
Modeling Moments of Crisis: The Case of Ireland
Nov 2012
Ireland has experienced a series of interlocking banking, fiscal, unemployment and political crises since 2007.
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Grantee paper
Poisoning the Well, or How Economic Theory Damages Moral Imagination
Oct 2012
Contemporary mainstream economics has widely “poisoned the well” from which people get their ideas about the relationship between economics and ethics.
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Grantee paper
Fat-Tail Distributions and Business-Cycle Models
Sep 2012
Recent empirical findings suggest that macroeconomic variables are seldom normally distributed.
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Grantee paper
The Pricing Effects of Ambiguous Private Information
Sep 2012
Ambiguous private information leads to informational inefficiency of asset prices in rational expectations equilibrium.
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Grantee paper
Chartbook of Economic Inequality: 25 Countries 1911-2010
Sep 2012
The purpose of this Chartbook is to present a summary of evidence about changes in economic inequality – primarily income, earnings, and wealth – for 25 countries covering a 100 year period from 1911 to 2010.
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Grantee paper
Are Women Really More Risk-Averse than Men?
Sep 2012
While a substantial literature in economics and finance has concluded that women are more risk averse than men, this conclusion merits reconsideration.
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Grantee paper
Would Women Leaders Have Prevented the Global Financial Crisis? Implications for Teaching about Gender, Behavior, and Economics
Sep 2012
Would having more women in leadership have prevented the financial crisis?
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Grantee paper
Is Dismissing the Precautionary Principle the Manly Thing to Do? Gender and the Economics of Climate Change
Sep 2012
Many public debates about climate change now focus on the economic “costs” of taking action.
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Grantee paper
Income Distribution, Credit and Fiscal Policies in an Agent-Based Keynesian Model
Aug 2012
This work studies the interactions between income distribution and monetary and fiscal policies in terms of ensuing dynamics of macro variables (GDP growth, unemployment, etc.) on the grounds of an agent-based Keynesian model.
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Grantee paper
Method to simultaneously determine stock, flow, and parameter values in large stock flow consistent models
Jun 2012
Stock flow consistent macroeconomic models suffer from the lack of a coherent estimation method due to the complicated nature of the modeling process.
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Grantee paper
Macroeconomic Policy in DSGE and Agent-Based Models
Jun 2012
The Great Recession seems to be a natural experiment for macroeconomics showing the inadequacy of the predominant theoretical framework — the New Neoclassical Synthesis — grounded on the DSGE model.
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Grantee paper
The Financialization of the US Corporation: What Has Been Lost, and How It Can Be Regained
Jun 2012
Background paper for a presentation to the Seattle University School of Law Berle IV Symposiun, “The Future of Financial/Securities Markets,” London June 14-15, 2012.
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Grantee paper
The Making of America’s Imbalances
Jun 2012
This paper tracks the development of sectoral saving and borrowing in the US economy over the past 50 years.
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Grantee paper
Principled Policymaking in an Uncertain World
Jun 2012
Revised text of a presentation at the Conference on Microfoundations for Modern Macroeconomics, Columbia University, November 2010. I would like to thank Amar Bhidé, Roman Frydman, and Andy Haldane for helpful comments, and the Institute for New Economic Thinking for research support.
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Grantee paper
What’s Wrong with Economic Models?
Jun 2012
John Kay’s thought-provoking essay The Map is Not the Territory: An Essay on the State of Economics argues that economists have been led astray by excessive reliance on formal models derived from assumptions that bear too little similarity to the world we live in.
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Grantee paper
State-Dependent Effects of Fiscal Policy
May 2012
We investigate the effects of government spending on U.S. economic activity using a threshold version of a structural vector autoregressive model.
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Grantee paper
Does the Effectiveness of Fiscal Stimulus Depend on Economic Context?
Apr 2012
The topic of this session of the INET conference is a question: does the effectiveness of fiscal policy in stabilizing an economy depend on the underlying economic context in which the policy is implemented?
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Grantee paper
Old Lady Charm: Explaining the Persistent Appeal of Chicago Antitrust
Apr 2012
The paper deals with the mysterious persistence of the Chicago approach as the main analytical engine driving antitrust enforcement in the US.
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Conference paper
Revitalizing the Eurozone without Fiscal Union
Apr 2012
The ongoing eurozone crisis has prompted many to argue that monetary union withoutfiscal union was bound to fail.
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Conference paper
Financial Instability after Minsky:Heterogeneity, Agent Based Models and Credit Networks
Apr 2012
Albeit the majority of the profession either ignores Minskyís Financial Instability Hypothesis (FIH) or considers it plainly wrong, at least since the mid-80’s a few influential economists —who have certainly not embraced any unorthodoxcredo —have grown more receptive to this idea and eager to incorporate it in their models, even if diluted and sometimes disguised in order to make it more palatable to the conventional “representative” macroeconomist
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Conference paper
Taking Stock of Complexity Economics: A Comment
Apr 2012
I am supposed to speak about Complexity Economics and the issues this theoretical approach is able to illuminate. Defined as such, it appears as if I should discuss methodology and I am reminded of Paul Krugman’s quote: “It is said that those who can, do, while those who cannot, discuss methodology”. So, having a discussion centered on methodology may give the impression that the panelists in this session are unable to make scientific progress.
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Conference paper
Andrew Haldane: Financial Arms Races
Apr 2012
Elephant seals have got too big for their beaches. A large specimen might weigh over 8000 lbs (3700 kg).Their size has a simple evolutionary explanation. Large males fight for the right to mate with a whole beach full of females. For elephant seals it is, quite literally, winner-takes-all. And the key to winning is simple – size.
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Conference paper
Real vs. Imagined Financial Markets The Regulatory Challenge
Apr 2012
We have grown accustomed to regulating financial markets based on imagined, not real markets. Real markets are shaped by and co-evolve with institutional arrangements within two fundamental constraints: Imperfect knowledge and the threat of illiquidity.
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Conference paper
Finance and Growth: When Credit Helps, and When it Hinders
Apr 2012
The financial sector can support growth but it can also cause crisis. The present crisis has exposedgaps in economists’ understanding of this dual potential.
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Conference paper
Instability in Financial Markets: Sources and Remedies
Apr 2012
In the seemingly never-ending aftermath to the economic crisis that began in 2007, there is little disagreement that financial markets are characterized by instability rather than stability.
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Conference paper
Instability in Financial Markets: Sources and Remedies The View from Economic History
Apr 2012
Taking a long‐run view from economic history, I make three points about instability in financial markets. First, I argue that economic historians have a relatively good understanding of the proximate causes of financial crises.
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Conference paper
Inequality and Employment
Apr 2012
“Natural rate theory” has dominated interpretations of economic trends and policy prescriptions over many decades. European-type welfare state institution were claimed to cause a compressed wage distribution that distorts otherwise well functioning labor markets.
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Conference paper
Material intensity, productivity and economic growth
Apr 2012
Many models of economic growth exclude materials from the production function. Growing environmental pressures and resource prices suggest that this may be increasingly inappropriate.
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Conference paper
Does the Effectiveness of Fiscal Stimulus Depend on Economic Context?
Apr 2012
The topic of this session of the INET conference is a question: does the effectiveness of fiscal policy in stabilizing an economy depend on the underlying economic context in which the policy is implemented?
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Conference paper
Moving Towards Climate Justice: Overcoming Barriers to Change
Apr 2012
The present paradox, as ecological economist Bill Rees is fond of putting it, is simple yet profoundly troubling: “The ecologically necessary is politically infeasible, but the politically feasible is ecologically irrelevant.”
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Conference paper
Towards an Ecological Macroeconomics
Apr 2012
Three major crises are confronting the world. The first is the increasing and uneven burden of humans on the biosphere, and the observation that we have already surpassed the ‘safe operating space’ for humanity with respect to three planetary boundaries: climate change, the nitrogen cycle and biodiversity loss.
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Conference paper
Economics Needs to Treat The Economy as a Complex System
Apr 2012
The path to better understanding the economy requires treating the economy as the complex system that it really is. We need more realistic behavioral models, but even more important, we need to capture the most important components of the economy and their most important interactions, and make realistic models of institutions.
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Conference paper
Reconstructing Economics: Agent Based Models and Complexity
Apr 2012
In 1803 Louis Poinsot, a French physicist, wrote a book of great success, Elements de Statique, which was destined to have practical and social influences unimaginable to the same author.
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Conference paper
The Impact of Inequality on Macroeconomic Dynamics
Apr 2012
In the last few years the impact of income distribution on macroeconomic dynamics has received growing academic attention.
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Conference paper
Leveraging Inequality
Apr 2012
Long periods of unequal incomes spur borrowing from the rich, increasing the risk of major economic crises
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Conference paper
Unequal=Indebted
Apr 2012
Higher income inequality in developed countries is associated with higher domestic and foreign indebtedness
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Conference paper
Debt Overhang and Capital Regulation
Apr 2012
We analyze shareholders’ incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer.
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Conference paper
The Austerity Trap: A Century of Unrest and Budget Cuts
Apr 2012
Budget cuts can be dangerous. Inspired by the wrenching experience in Greece, increasing attention is now being paid to the fact that austerity may fail to reduce the government deficit if the economy declines in response, as is likely in a liquidity trap (Delong and Summers 2012).
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Conference paper
The Culprit of the Global Crisis – German Mercantilism!
Apr 2012
These are truly testing times. The world economic order – capitalism – is being called into question following the Lehman crisis. The world’s best form of societal organization – democracy – is being challenged by the economic success of autocratic countries such as China and Singapore.
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Conference paper
Change and Expectations in Macroeconomic Models: Recognizing the Limits to Knowability
Apr 2012
In modern economies, individuals and companies engage in innovative activities, discovering new ways to use existing physical and human capital, and new technologies in which to invest. The institutional and broader social context within which these activities take place also changes in novel ways.
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Conference paper
Sovereignty Effects
Apr 2012
With my remarks today on financial markets and the financial crisis, I do not make any claims to originality. Rather, they are intended as a reminder of certain circumstances that are already familiar to us, in one form or another.
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Grantee paper
Words to the Wise: Stock Flow Consistent Modeling of Financial Instability
Oct 2011
The crisis has exposed the failure of economic models to deal sensibly with endogenously generated crises propagating from the financial sectors to the real economy, and back again.
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Conference paper
A Tale of Two Trilemmas
Apr 2011
In a classic book and subsequent articles, Obstfeld and Taylor (2004) have shown how the broad contours of international financial history over the past century and a half can be well understood by appealing to the famous economictrilemma which emerges from the standard Mundell-Fleming model many of us still teach our undergraduates.