Finance

Macroeconomics and finance beyond DSG

The deregulatory zeal of the 1990s and 2000s has returned to the US and the post-Brexit plans to protect the City in the UK sound like the pre-crash light-touch mentality that fueled global regulatory arbitrage.  As a result, a foremost “challenge of our time” is to stop “subsidizing more one-way bets” and “doubling down on failure.”

An Assessment and Some Policy Implications

One-way bets and bubble machines: How can central banks restrain moral hazard when markets know they bail out big banks in financial crises?

Decomposition by such an important category as gender helps us understand the economy at the macro level, and design macroeconomic policy, better. It also provides the foundation for advocating equal gender rights and outcomes. But, where gendered policy issues arise in mainstream macroeconomics (income maldistribution, labour market composition, etc.) the subject matter is narrowed by its microfoundations, by focusing on GDP growth and on suboptimal outcomes being explained by market imperfections.

What would it look like if women and other marginalized groups could fully participate in our economy and society?

Untangling the Facts about Immigration in the World Economy.

After re-iterating five well-known theorems about the properties of conditional expectations in stationary settings—such as providing unbiased minimum mean square error predictions despite in- complete information, and the law of iterated expectations—we clarify unpredictability and illustrate its prevalence empirically.

In the paper that we present this afternoon, Soren Johansen, Anders Rahbek, Morten Tabor, and I introduce the Qualitative Expectations Hypothesis (QEH) as a new approach to modeling macroeconomic and financial outcomes.

How we can create useful economic theory that recognizes that the future is radically uncertain?

This paper discusses household debt as a long term phenomenon that influences economies beyond crises.1 In other words, rather than look at how household indebtedness can lead to crises, I will focus on its surprising persistence at very high levels, and its interactions along the way with other key variables, such as public policies and spending. The first section describes some stylized facts and the final section explores the macroeconomic consequences.

The debt-growth relationship is complex, varying across countries and being affected by global factors. While there is no simple universal threshold above which debt-to-GDP becomes a significant brake on growth, based on data from the last four decades we show that high and rising public debt burdens slow down growth in the long term.

This paper discusses what we have learned about the debt build-up in advanced societies over the past century. It shows that the extraordinary growth of aggregate debt in the past century was driven by the private sector.

What role does debt play in triggering economic crises, and is the problem principally public or private sector debt?

What Do Citations Actually Measure in Economics and How Should Economic Journals and Department Review Committees Use This Data? 

Can a monetary union without true banking and fiscal union be saved? What remains of the hopes that animated the Treaty of Rome?

This paper aims to assess such tendency to return to a supply-determined potential output, independent of aggregate demand, after episodes of demand expansion.

Preliminary draft prepared for INET conference session “A Decade of Stagnation. Why?”

What explains the slow recovery from the financial crisis and great recession in so much of the world?

INET gathered hundreds of new economic thinkers in Edinburgh to discuss the past, present, and future of the economics profession.

The Festival for New Economic Thinking is a collaborative initiative of several organizations, and aims to bring together those who seek to improve how economics is taught, studied and practiced. 

Financial Globalization and its Cryptocurrency Discontents

Why it’s time to repeal the debt ceiling and replace it with a ‘truth in borrowing’ act

Adair Turner in conversation with Nasser Munjee, moderated by David Webb

It is commonly overlooked that the concept of market efficiency embowers a time-dimension. Illustrating with an example from the class of persistent random walks, we show that a price process can be a martingale on one time-scale but inefficient on another.

This paper analyzes the link between Kamakura Risk Information Services (KRIS) data on megabank default probabilities and credit spreads.

The path of austerity could spread economic pain and social woes far beyond the Caribbean island, says public debt expert Martin Guzman 

Xavier Gabaix argues that public policies should prioritize alleviating deprivation at the bottom over narrowing the rich-poor gap 

This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century.

Personal connections are key to understanding concentrations of wealth and power

An examination of some little-known ways nation states and central banks prop up megabanks

When an economic model fails, it is reality—and the people living in it—who pay the bills while the model lives on, unscathed.

Back-room deals on corporate tax reform won’t increase growth

If standard economic theory can’t explain a traffic jam, how can it cope with crises?

The YSI Latin America Working Group is hosting a workshop at the United Nations ECLAC Summer School on Latin American economies.

As the Nobel laureate economist Robert Solow noted in 1987, computers are “everywhere but in the productivity statistics.” Since then, the so-called productivity paradox has become ever more striking. Automation has eliminated many jobs. Robots and artificial intelligence now seem to promise (or threaten) yet more radical change. Yet productivity growth has slowed across the advanced economies; in Britain, labor is no more productive today than it was in 2007.

How a Banking Union Has Created Deep Divisions that Undermine the Eurozone’s Stability

Why it’s urgent that China adjust its balance of payment structure and safeguard its foreign assets

The famed short-seller offers a mid-2017 reality check for “fake fiscal news,” and economic pipe dreams, and sees “portents of even worse things”

Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment

The Young Scholars Initiative and its working groups will be hosting meetings and discussions in and around the 2017 Trento Festival of Economics. 

A discussion featuring Kenneth Smith, Head of the Trade and NAFTA Office of the Ministry of the Economy of Mexico, and Jay Pelosky, Principal of Pelosky Global Strategies.

Globalization has fallen into disrepute; the myth of the prosperity and happiness-generating  free market has been dispelled. A visionary concept that provides guidance and direction is required now.

How austerity policies and microfinance can bankrupt rather than empower women. Professor Girón discusses why microfinance cannot replace development banks.

The Economic History Working Group and the Financial Stability Working Group are organizing a two day seminar on May, 12th-13th in New York. The theme for the will be “Institutional responses to financial crises 1870 to 2017”.

A breakup of the Euro will be too difficult and costly for member countries.

This note comments on Eric Weinstein’s, “How and Why Government, Universities, and Industries Create Domestic Labor Shortages of Scientists and High-Tech Workers,” posted recently on INET’s website.

A discussion with Kaushik Basu, Professor of Economics and the C. Marks Professor of International Studies at Cornell University and former Senior Vice President and Chief Economist of the World Bank. 

How the U.S. New Economy Business Model Has Devalued Science and Engineering PhDs

April 28-29, 2017, USC Dornsife INET is hosting a conference on inequality, globalization, and macroeconomics at the University of Southern California. The goal of this conference is to bring together leading researchers to discuss and present new approaches and new results on the relationships between inequality and macroeconomics and between inequality and globalization. Please direct any questions or comments to [email protected]. 

The YSI Keynesian Economics Working Group is co-hosting a PhD seminar at the Nordic Post-Keynesian Conference entitled “Economics at the Edge”.

“The humility to accept that economic propositions cannot be universal would save us from self-defeating arrogance.” Economist Amit Bhaduri adds his perspective to our Experts on Trial discussion.

In a recent interview at the INET offices in New York, Anwar Shaikh provided a background to the work and his life in this quest.

Brazil’s current economic scenario does not resemble the emerging economy that until recently fueled the optimism of analysts and investors.

In this comment, we explain our objections to the SEC’s current formulation of the Pay Ratio Disclosure Rule on each of three grounds: the erroneous estimation of CEO pay; the unclear specification of the “median” worker; and the risk of normalizing a pay ratio that is far too high. Then we present the latest data on the remuneration of the 500 highest-paid CEOs in the United States, demonstrating the way in which the SEC’s measure of CEO pay that enters into the CEO-to-median-worker pay ratio tends to systematically underestimate actual executive pay.

A discussion with Shahar Shelef, Director of The Economic and Strategic Affairs Department, Center for Policy Research at the Israeli Ministry of Foreign Affairs.

Pursuing equality while growing the economy requires reframing social spending as a form of investment.

A reference guide to all Institute for New Economic Thinking (INET) community presentations at the Eastern Economic Association’s (EEA) 2017 annual meeting

A discussion on Brexit with Iain Begg, Professorial Research Fellow at the European Institute, London School of Economics.

Young Scholars from the YSI working groups on Innovation, Complexity Economics, Philosophy of Economics and Financial Stability will present their research at a one-day workshop following The Economics of Post-Factual Democracy conference in Copenhagen, Denmark.

Mallaby’s research shows that Greenspan knew more about the looming perils than people realize.

Panic over the impact on  German savers of low interest rates and looming inflation neglects to mention that very few Germans are saving much

Turner discusses The Economist’s Society the liquidity risks posed by Exchange Traded Funds.

Institute Governing Board member Anatole Kaletsky argues that the Trump Administration’s policies will boost inflation and spur interest-hikes as well as a stronger dollar more rapidly than many expect, but that the European Union’s economy is on the mend

Smick argues that distortions of capitalism have fed populist rebellion, and that reviving a capitalism that offers opportunity for average people to increase their earnings is an urgent priority if America’s political economy is to be stabilized.

A discussion on China’s economic management at the beginning of the Trump era featuring Leland R. Miller, Co-founder and CEO of the China Beige Book.

A Speaker Series for the Greater Philadelphia Region

Donald Trump’s presidency is a symptom of an interregnum between economic orders – a period that will result in a new balance between state and market. While his administration’s economic policies are unlikely to provide the right answer, they may at least show the world what not to do.

The YSI Economic History Working Group and the YSI Financial Stability Working Group are hosting a webinar series on the “Institutional Responses to Financial Crises, 1870 to 2017”. 

Beatrice Cherrier remembers Tony Atkinson’s influential intellectual, educational and institutional contribution to the field of public economics

New evidence shows personal wealth interests drive Congressional votes

As part of an International Economy symposium, INET Research Director Tom Ferguson assessed the challenge facing central bankers through the lens of the missing virtues of Dorothy’s travel companions in the Wizard of Oz

There is no good case for major deregulation of the US financial sector, warns INET Board Chairman Adair Turner, and any backsliding by a Trump administration on banks’ capital requirements instituted globally after 2008 will be very dangerous

Beijing’s leaders face a critical dilemma over a credit boom that imperils China’s prospects for a smooth transition to a sustainable economic path

Notes from the Institute’s Director of Research on some significant papers and contributions produced in 2016 under the INET rubric 

Campaign promises aside, the policies favored by President-elect Donal Trump are likely to bring more pain than gain to  working-class Americans 

Former Treasury Secretary Paul Volcker reviews a life’s work and the pressing challenges of the moment in conversation with Institute for New Economic Thinking President Rob Johnson

Milwaukee-born short-seller Jim Chanos, founder and managing partner of New York-based Kynikos Associates, teaches University of Wisconsin and Yale business students about corporate fraud. During his life and career, he has witnessed seismic shifts in economic thinking and the relationship between labor and capital. Chanos shares his thoughts on the world emerging from the election of Donald Trump and the tumultuous political events of 2016. 

In the 40th anniversary year of John Kenneth Galbraith’s Age of Uncertainty, the 1970s look remarkably stable in comparison with today’s turbulent world 

A discussion on President-elect Trump’s economic agenda and its implications for the U.S. and world economies.

As the world turns upside down, Mariana Mazzucato discusses how to shape an economy that works for everyone

Remedies have failed to produced growth and reduce indebtedness because they’re focused on protecting toxic behavior by banks in Europe’s core countries

The Volcker Alliance has launched a series of new papers with important proposals for reforming financial regulations to guard against future crises 

The Volcker Alliance and the Institute for New Economic Thinking convened a group of influential thinkers for a half-day forum to discuss regulatory and structural changes needed to ensure the stability and resilience of financial markets. 

Neither do rapid growth in government debt, declining interest rates, or rapid increases in a central bank’s balance sheet

Mission-oriented public investment is vital to spur a revival of private-sector investment

A conversation with Isaac Stone Fish, Senior Fellow at the Asia Society’s Center for U.S. – China Relations and Asia Editor at Foreign Policy Magazine.

Hoping to learn from other countries’ experiences in organizing finance for agriculture, more than 150 Americans were sent abroad in the summer of 1913 to investigate the minutiae of farm-credit systems in and around Europe.

Economists offer widely different explanations for the decline in trade between nations, in a debate that remains unresolved but is increasingly urgent

A conversation with Richard Vague, Managing Partner at Gabriel Investments and Chairman of the Governor’s Woods Foundation.

Seven dangers of chronically low interest rates amid austerity and fiscal-policy phobia

This paper analyzes the Euro crisis in light of the experience of center-periphery relations over the last 40 years of renewed financial globalization.

Oral contraception created a population that, today, is disproportionately inclined to save, resulting in low to negative real interest rates. Excess eurozone savings can only be accomodated by raising sovereign debt levels

Like the Great Depression and the stagflation of the ’70s, the anemic growth of the U.S. economy can’t be understood or remedied without changes in economists’ thinking

We examine whether personal wealth interests affect politicians’ decisions about stabilizing financial markets.

New approaches are being developed, but efforts are fragmented and need to be brought together if we hope to piece together a paradigm.