Levy Institute Publications
Strategic Analysis, December 2020 | December 2020 | Dimitri B. Papadimitriou, Christos Pierros, Nikolaos Rodousakis, Gennaro ZezzaWhile the effects of the COVID-19 pandemic have been broadly similar for individuals, families, societies, and economies globally, the policy responses have varied significantly between countries. In the case of Greece, the pandemic abruptly ended the country’s fragile recovery and threw its economy into a dramatic contraction beginning in 2020Q2. Fiscal stimulus programs financed by reserve funds and European-backed structural funds have been implemented, but to date there is no evidence of a significant impact. Given the emergence of COVID-19’s second wave of contagion and the economic consequences of business shutdowns and further job losses, our own growth projections, as well as those from the European Commission, IMF, OECD, and the Greek government, have been revised downward for 2021 and prospects for the beginning of a recovery before the end of 2020 have died out.
Using their stock-flow consistent macroeconomic model developed for Greece (LIMG), we run simulations for a baseline scenario and two alternative policy outcomes. The results of the projections for a “business as usual” baseline scenario are pessimistic and show that a V-shaped recovery is not in the cards. The European “recovery funds” alternative scenario projections, while more pessimistic than our report from May 2019, indicate that implementing these funds beginning in 2021Q3 will result in accelerating growth with positive outcomes. A more robust GDP growth rate and consequent employment growth can be realized with the combined effects of the European recovery funds together with an enhanced public job guarantee program. It is this mix of policies that can gain traction and bear fruit in putting the Greek economy on a path to sustainable and inclusive growth.
This Strategic Analysis is the joint product of the Levy Economics Institute of Bard College and INE-GSEE (Athens, Greece). It is simultaneously issued in both English and Greek.Download:Associated Program:Author(s):Related Topic(s):
Strategic Analysis, October 2020 | October 2020 | Dimitri B. Papadimitriou, Francesco Zezza, Gennaro ZezzaItaly was the first European country to be impacted by COVID-19, rapidly overwhelming healthcare facilities in some areas and prompting the government to shut down nonessential economic activities, with an inevitable (asymmetric) impact on production and income. Though the gradual reopening of most business activities began in 2020Q3, the extent of the shutdown’s damage is difficult to assess. The current political debate is now focusing on what can be achieved with European funds (in the form of both grants and loans), which should become available beginning in 2021. In this Strategic Analysis, Institute President Dimitri B. Papadimitriou, Research Associate Francesco Zezza, and Research Scholar Gennaro Zezza detail the shutdown’s impact on business activities in Italy, incorporating the planned government intervention with preliminary evidence available through 2020Q3 to evaluate a baseline projection for the Italian economy up to 2022.Download:Associated Program:Author(s):Related Topic(s):
Public Policy Brief No. 154, 2021 | February 2021 | Jan Kregel
Let Us Look Seriously at the Clearing UnionThis policy brief explores a route to remaking the international financial system that would avoid the contradictions inherent in some of the prevailing reform proposals currently under discussion. Senior Scholar Jan Kregel argues that the willingness of central banks to consider electronic currency provides an opening to reconsider a truly innovative reform of the international financial system, and one that is more appropriate to a digital monetary world: John Maynard Keynes’s original clearing union proposal.
Kregel investigates whether such a clearing system could be built up from an already-existing initiative that has emerged in the private sector. He analyzes the operations of a private, cross-border payment system that could serve as a real-world blueprint for a more politically palatable equivalent of Keynes’s international clearing union.Download:Associated Program(s):Author(s):Related Topic(s):
Public Policy Brief No. 153, 2020 | September 2020 | Luiza Nassif Pires, Laura Carvalho, Eduardo RawetAfter spending over 6 percent of GDP responding to the COVID-19 crisis, Brazil has suffered among the worst per capita numbers in the world in terms of cases and deaths. In this policy brief, Luiza Nassif-Pires, Laura Carvalho, and Eduardo Rawet explore how stark inequalities along racial, regional, and class lines can help account for why the pandemic has had such a damaging impact on Brazil. Although they find that fiscal policy measures have so far neutralized the impact of the crisis with respect to income inequality, the existence of structural inequalities along racial lines in particular have resulted in an unequally shared public health burden. Broader policy changes are necessary for addressing dimensions of inequality that are rooted in structural racism.Download:Associated Program(s):Author(s):Luiza Nassif Pires Laura Carvalho Eduardo RawetRelated Topic(s):
Policy Note 2021/1 | January 2021 | Jan KregelWhile governments may consider implementation of John Maynard Keynes’s original clearing union proposal for the international financial architecture too difficult or radical, Senior Scholar Jan Kregel notes that the private sector has already produced a virtual equivalent of an international global monetary system. Currently, this system is employed as an extension of the international mobile telephone services provided by a private company, rather than a financial institution. The clearing system he describes provides an example of a possible solution that retains national currencies without requiring the substitution of the dollar with another national currency or basket of national currencies.Download:Associated Program:Author(s):Related Topic(s):
Policy Note 2020/6 | October 2020 | Jan KregelAs COVID-19 infection and test positivity rates rise in the United States and federal stimulus plans expire, Senior Scholar Jan Kregel articulates an alternative approach to analyzing the economic problems raised by the pandemic and organizing an appropriate policy response. In contrast to both the mainstream and some Keynesian-inspired approaches, Kregel advocates a central role for direct social provisioning as a means of equitably sharing the costs of quarantine under conditions of strict lockdown.Download:Associated Program(s):Author(s):Related Topic(s):
Statement of Senior Scholar L. Randall Wray to the House Budget Committee, US House of Representatives
Testimony, November 20, 2019 | November 2019 | L. Randall Wray, Yeva Nersisyan
Reexamining the Economic Costs of DebtOn November 20, 2019, Senior Scholar L. Randall Wray testified before the House Committee on the Budget on the topic of reexamining the economic costs of debt:
"In recent months a new approach to national government budgets, deficits, and debts—Modern Money Theory (MMT)—has been the subject of discussion and controversy. [. . .]
In this testimony I do not want to rehash the theoretical foundations of MMT. Instead I will highlight empirical facts with the goal of explaining the causes and consequences of the intransigent federal budget deficits and the growing national government debt. I hope that developing an understanding of the dynamics involved will make the topic of deficits and debt less daunting. I will conclude by summarizing the MMT views on this topic, hoping to set the record straight."
Update 1/7/2020: In an appendix, L. Randall Wray responds to a Question for the Record submitted by Rep. Ilhan OmarDownload:Associated Program(s):Author(s):L. Randall Wray Yeva NersisyanRelated Topic(s):
Research Project Report, April 2018 | April 2018 | L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, Stephanie A. Kelton
A Path to Full EmploymentDespite reports of a healthy US labor market, millions of Americans remain unemployed and underemployed, or have simply given up looking for work. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton examine the impact of a new “job guarantee” proposal that would seek to eliminate involuntary unemployment by directly creating jobs in the communities where they are needed.
The authors propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour and offer a basic package of benefits. This report simulates the economic impact over a ten-year period of implementing the PSE program beginning in 2018Q1.
Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.Download:Associated Program:Author(s):Related Topic(s):
Research Project Report, September 2019 | September 2019 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila, Michalis Nikiforos, Kijong Kim, Tamar Khitarishvili
A Macro-Micro Policy Model for Ghana and TanzaniaFeminist economics has long emphasized the role of physical and social infrastructure as determinants of the time women spend on household production (the provision of unpaid domestic services and care). Surprisingly, there is a lack of studies that directly investigate how infrastructure improvements affect the time spent on household production and commuting to work, which is another important unpaid activity for most employed individuals. We attempt to fill the lacunae in the research by studying this issue in the context of Ghana and Tanzania utilizing the framework of the Levy Institute Measure of Time and Income Poverty. Separately, while there are several studies (including those done previously at the Levy Institute) on the macroeconomic impacts of government expenditures on care, these assessments tend to be based primarily on employment multipliers along with simple macroeconomic assumptions. We develop a disaggregated and fully articulated macroeconomic model based on the social accounting matrices for the two countries to take account of the intersectoral linkages and external constraints, such as balance of payments, that are particularly important for many developing nations, including Ghana and Tanzania. The macro- and microeconomic aspects are integrated in a unified analytical framework via a top-down disaggregated macroeconomic model with microsimulation that is novel in that it enables the investigation of the gendered economic processes and outcomes at the macroeconomic and microeconomic levels.
Download:Associated Program:Author(s):Ajit Zacharias Thomas Masterson Fernando Rios-Avila Michalis Nikiforos Kijong Kim Tamar KhitarishviliRelated Topic(s):
Research Project Report, February 2018 | February 2018 | Scott Fullwiler, Stephanie A. Kelton, Catherine Ruetschlin, Marshall SteinbaumAmong the more ambitious policies that have been proposed to address the problem of escalating student loan debt are various forms of debt cancellation. In this report, Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum examine the likely macroeconomic impacts of a one-time, federally funded cancellation of all outstanding student debt.
The report analyzes households’ mounting reliance on debt to finance higher education, including the distributive implications of student debt and debt cancellation; describes the financial mechanics required to carry out the cancellation of debt held by the Department of Education (which makes up the vast majority of student loans outstanding) as well as privately owned student debt; and uses two macroeconometric models to provide a plausible range for the likely impacts of student debt cancellation on key economic variables over a 10-year horizon.
The authors find that cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve). These results suggest that policies like student debt cancellation can be a viable part of a needed reorientation of US higher education policy.
Download:Associated Program(s):Author(s):Scott Fullwiler Stephanie A. Kelton Catherine Ruetschlin Marshall SteinbaumRelated Topic(s):
One-Pager No. 66 | April 2021 | Frank VenerosoAccording to Frank Veneroso, a broad subset of today’s US stock market has become what he calls a “pure price-chasing bubble.” Examination of the history of comparable pure price-chasing bubbles shows there has been a set of key causal factors that contributed to these rare market events. The most extreme such case was an over-the-counter market in Kuwait called the “Souk al-Manakh.” This exemplar of a pure price-chasing phenomenon may shed light—albeit unflattering—on the current US equity market, Veneroso contends.Download:Associated Program:Author(s):Frank VenerosoRelated Topic(s):
One-Pager No. 65 | February 2021 | Yeva Nersisyan , L. Randall WrayWith the unveiling of President Biden’s nearly $2 trillion proposal for addressing the COVID-19 crisis, Democrats appear keen to avoid repeating the mistakes of the Great Recession—most notably the inadequate fiscal response.
Yeva Nersisyan and L. Randall Wray observe that while Democrats are not falling for the “deficit bogeyman” this time, critics have pushed the idea that the increase in government spending will cause inflation. Nersisyan and Wray argue that the current fiscal package should be evaluated as a set of relief measures, not stimulus, and that the objections of the inflation worriers should not stand in the way of taking needed action.Download:Associated Program:Author(s):Yeva Nersisyan L. Randall WrayRelated Topic(s):
Working Paper No. 987 | March 2021 | Frank Veneroso, Mark Pasquali
The Anatomy of a Pure Price-Chasing BubbleIt is widely agreed that the Nasdaq during the dot-com era 20 years ago was a full-fledged stock market bubble. Recently, the US stock market according to many metrics has become significantly more speculative and overvalued than it was at the dot-com peak 20 years ago. In both instances, a very broad subset of stocks became so highly valued that speculation in them had to be untethered from all fundamentals: the essence of what we call a “pure price-chasing bubble.”
This paper, drawn from a book in progress, examines the history of stock markets for comparable pure price-chasing bubbles, finding nine or so which have ever reached such a speculative extreme, with an over-the-counter market in Kuwait in the early 1980s called the “Souk al-Manakh” representing the most extreme example. Based on personal exposure to this Souk al-Manakh almost 40 years ago, we describe this anatomy and thereby make transparent the recurrent dynamics—on the way up and on the way down—of these greatest asset bubbles in human history. When one applies this framework to the current US stock market, one sees that the stock market in the US today will likely follow the disastrous path of the dot-com market.Download:Associated Program:Author(s):Frank Veneroso Mark PasqualiRelated Topic(s):
Working Paper No. 986 | March 2021 | Pablo Gabriel Bortz
Evolution and Contemporary RelevanceThis paper traces the evolution of John Maynard Keynes’s theory of the business cycle from his early writings in 1913 to his policy prescriptions for the control of fluctuations in the early 1940s. The paper identifies six different “theories” of business fluctuations. With different theoretical frameworks in a 30-year span, the driver of fluctuations—namely cyclical changes in expectations about future returns—remained substantially the same. The banking system also played a pivotal role throughout the different versions, by financing and influencing the behavior of return expectations. There are four major changes in the evolution of Keynes’s business cycle theories: a) the saving–investment framework to understand changes in economic fluctuations; b) the capabilities of the banking system to moderate the business cycle; c) the effectiveness of monetary policy to fine tune the business cycle through the control of the short-term interest rate or credit conditions; and d) the role of a comprehensive fiscal policy and investment policy to attenuate fluctuations. Finally, some conclusions are drawn about the present relevance of the policy mix Keynes promoted for ensuring macroeconomic stability.Download:Associated Program(s):Author(s):Pablo Gabriel BortzRelated Topic(s):
Volume 30, No. 1 | February 2021 | Elizabeth Dunn, Michael StephensThis issue features two strategic analyses: the first finds that while the disbursement of EU funds would help hasten Greece’s recovery, getting closer to the pre-pandemic growth trend requires further fiscal action; the second, for Italy, cautions that the government’s seeming commitment to use European funds to reduce public debt through expenditure cuts aims at the wrong target and projects the impact of an alternative scenario that increases Italy’s public sector employment. Public policy briefs consider the moral hazard of leaving federal fiscal aid to state and local governments dependent on shifting political winds and address the interactions between the COVID-19 crisis and overlapping inequalities in Brazil. Policy notes propose an alternative to fiscal stimulus for COVID-19 relief—one centered on direct “social provisioning” to support a strict lockdown—and use the work of Michał Kalecki to develop a framework for analyzing the impact of government debt management to enable more effective fiscal policy.
Working papers in this issue discuss evidence of inequality in the disproportionate burden the government-mandated shutdowns have placed on Black women in the United States; outline a Minskyan approach to the post-pandemic recovery to meet the challenges that still lay ahead; apply network dynamics observed in ecosystems to investigate the role networks play in stabilizing and destabilizing economic systems; describe the evolution of John Maynard Keynes’s analysis of instability, illustrating that the General Theory is indeed a general theory; focus on the implications of Keynes’s “beauty contest” metaphor in the modern economy; trace the “Kansas City” approach to Modern Money Theory (MMT) from its origins in the mid-1990s through today; apply an MMT approach to an open economy to ascertain its effect in non-dollar economies; and apply a Keynesian perspective to an exploration of bond yields in the UK and Japan. Several papers employ methodologies developed at the Levy Institute. The first two evaluate the quality of match used to create synthetic datasets for studying time poverty effects: one for data used in the Levy Institute Measure of Time and Consumption Poverty (LIMTCP) for Ethiopia and South Africa and the second evaluates the match for the Levy Institute Measure of Time and Income Poverty (LIMTIP) for Italy; a third applies a version of the Levy Institute’s macrosimulation method developed for South Africa, Turkey, and the United States to create a macro-micro model for assessing the gendered employment impacts of government expenditure. Two final working papers addressing fiscal issues round out this issue: the first evaluates budget credibility at the subnational level in India and the other advocates for fiscal policies grounded in the principles of functional finance to foster equality in Argentina, Brazil, and Mexico.
Program: The State of the US and World Economies
DIMITRI B. PAPADIMITRIOU CHRISTOS PIERROS NIKOLAOS RODOUSAKIS and GENNARO ZEZZA, What’s Ahead for the Greek Economy?
DIMITRI B. PAPADIMITRIOU, FRANCESCO ZEZZA, and GENNARO ZEZZA, When Will Italy Recover?
JAN KREGEL, Alternative Macro Policy Response for a Pandemic Recession
HAROLD M. HASTINGS, TAI YOUNG-TAFT, and CHIH-JUI TSEN, Ecology, Economics, and Network Dynamics
Program: Monetary Policy and Financial Structure
JÖRG BIBOW, The General Theory as “Depression Economics”?: Financial Instability and Crises in Keynes’s Monetary Thought
EMILIO CARNEVALI and MATTEO DELEIDI, The Trade-off between Inflation and Unemployment in an MMT World: An Open Economy Perspective
LORENZO ESPOSITO and GIUSEPPE MASTROMATTEO, In the Long Run We Are All Herd: On the Nature and Outcomes of the Beauty Contest
TANWEER AKRAM and HUIQING LI, The Empirics of UK Gilts’ Yields
LEONARDO BURLAMAQUI and ERNANI T. TORRES FILHO, The COVID-19 Crisis: A Minskyan Approach to Mapping and Managing the (Western?) Financial Turmoil
TANWEER AKRAM and HUIQING LI, Some Empirical Models of Japanese Government Bond Yields Using Daily Data
L. RANDALL WRAY, The "Kansas City" Approach to Modern Money Theory
Program: The Levy Institute Measure of Time and Income Poverty
FERNANDO RIOS-AVILA, Quality of Match for Statistical Matches Used in the Development of the Levy Institute Measure of Time and Consumption Poverty (LIMTCP) for Ethiopia and South Africa
Program: Distribution of Wealth and Income
LUIZA NASSIF PIRES, LAURA CARVALHO, and EDUARDO RAWET, Multidimensional Inequality and COVID-19 in Brazil
ALEX WILLIAMS, Moral Hazard in a Modern Federation
ERICA ALOÈ, Quality of Statistical Match Used in the Estimation of the Levy Institute Measure of Time and Income Poverty (LIMTIP) for Italy 2008 and 2014 and Preliminary Results
Program: Employment Policy and Labor Markets
MICHELLE HOLDER, JANELLE JONES, and THOMAS MASTERSON, The Early Impact of COVID-19 on Job Losses among Black Women in the United States
Program: Gender Equality and the Economy
JEROME DE HENAU and SUSAN HIMMELWEIT, Developing a Macro-Micro Model for Analyzing Gender Impacts of Public Policy
Program: Immigration, Ethnicity, and Social Structure
SAMEH HALLAQ, First Palestinian Intifada and Intergenerational Transmission of Human Capital
Program: Economic Policy for the 21st Century
LEKHA S. CHAKRABORTY, PINAKI CHAKRABORTY, and RUZEL SHRESTHA, Budget Credibility of Subnational Governments: Analyzing the Fiscal Forecasting Errors of 28 States in India
BENDREFF DESILUS, Fiscal Policy in Argentina, Brazil, and Mexico and the 2030 Agenda for Sustainable Development
Program: Federal Budget Policy
JAN TOPOROWSKI, Debt Management and the Fiscal Balance
Call for Applications: Virtual Seminar on Gender-Sensitive Macroeconomic Modeling for Policy Analysis
New Research Associates
Appreciation for Donors
Download:Author(s):Elizabeth Dunn Michael Stephens
Book Series, January 2020 | January 2020 | L. Randall Wray
Heterodox Economic Policy for the 21st CenturyA Great Leap Forward: Heterodox Economic Policy for the 21st Century investigates economic policy from a heterodox and progressive perspective. Author Randall Wray uses relatively short chapters arranged around several macroeconomic policy themes to present an integrated survey of progressive policy on topics of interest today that are likely to remain topics of interest for many years.
Published by: Elsevier Press
Current Research Topics
From the Press Room
Remembering Senior Scholar John F. Henry, 1943–2020
Senior Scholar L. Randall Wray debated the Heritage Foundation's Stephen Moore at an April 22 event sponsored by CFA Society Chicago.
Senior Scholar L. Randall Wray and Yeva Nersisyan pen an April 17 op-ed for The Guardian
Research Scholar Pavlina Tcherneva calls for direct investment in infrastructure and employment to stimulate economic recovery
Senior Scholar L. Randall Wray testified before the House Committee on the Budget, November 20
OpEd: Don’t let politics derail Greece’s economic recovery
Conference29th Annual Hyman P. Minsky Conference