Levy Institute Publications

  • Greece’s Economy after COVID-19


    Strategic Analysis, May 2020 | May 2020 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro Zezza
    Greece’s fragile economic recovery was halted by the COVID-19 pandemic: GDP, employment, exports, and investment are expected to record significantly negative trends. While some projections for GDP growth show a quick V-shaped recovery beginning in 2021, this is rather improbable given the Greek economy’s structural inefficiencies.
     
    This strategic analysis explores the consequences of various assumptions about the fall in the different sources of aggregate demand in order to produce a baseline projection for the Greek economy. A more optimistic scenario is also analyzed, in which the European Commission’s recently announced Recovery Fund materializes, allowing the government to increase public consumption as well as investment through EU grants and loans. The authors recommend additional measures to alleviate the impact of the shock and help put Greece’s economy back on track when the epidemic has died out.

  • Prospects and Challenges for the US Economy


    Strategic Analysis, January 2020 | January 2020 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro Zezza
    2020 and Beyond
    This Strategic Analysis examines the US economy’s prospects for 2020–23 and the risks that lie ahead. The baseline projection generated by the Levy Institute’s stock-flow consistent macroeconomic model shows that, given current fiscal arrangements and the slowdown in the global economy, the pace of the US recovery will slacken somewhat, with a growth rate that will average 1.5 percent over the next several years.

    The authors then point to three factors that can derail this already weak baseline trajectory: (1) an overvalued stock market; (2) evidence that the corporate sector’s balance sheets are more fragile than they have ever been in the postwar period; and (3) risks in the foreign sector stemming from the slowdown of the global economy, an overvalued dollar, and the current administration’s erratic trade policy.

  • Crisis, Austerity, and Fiscal Expenditure in Greece


    Public Policy Brief No. 151, 2020 | June 2020 | Michalis Nikiforos
    Recent Experience and Future Prospects in the Post-COVID-19 Era
    This policy brief provides a discussion of the relationships between austerity, Greece’s macroeconomic performance, debt sustainability, and the provision of healthcare and other social services over the last decade. It explains that austerity was imposed in the name of debt sustainability. However, there was a vicious cycle of recession and austerity: each round of austerity measures led to a deeper recession, which increased the debt-to-GDP ratio and therefore undermined the goal of debt sustainability, leading to another round of austerity. One of the effects of these austerity policies was the significant reduction in healthcare expenditure, which made Greece more vulnerable to the recent pandemic. Finally, it shows how recent pre-COVID debt sustainability analyses projected that Greek public debt would become unsustainable even under minor deviations from an optimistic baseline. The pandemic shock will thus lead to an explosion of public debt. This brings the need for a restructuring of the Greek public debt to the fore once again, as well as other policies that will address the eurozone’s structural imbalances.

  • The Impact of Technological Innovations on Money and Financial Markets


    Public Policy Brief No. 150, 2020 | June 2020 | Jan Kregel, Paolo Savona
    According to Senior Scholar Jan Kregel and Paolo Savona, attempting to maintain the status quo in the face of the introduction of some recent technological innovations—chiefly cryptocurrencies and associated instruments based on distributed ledger technology, the deployment of artificial intelligence, and the use of data science in financial markets—will create risks that increase instability and threaten national financial systems. In this policy brief, they analyze the impacts of these innovations on the present institutional environment and outline an appropriate regulatory framework. Kregel and Savona argue that a public monopoly on the issuance of cryptocurrency could promote financial stability and help repair the dissociation between finance and the real economy.

  • Debt Management and the Fiscal Balance


    Policy Note 2020/5 | July 2020 | Jan Toporowski
    In this policy note, Jan Toporowski provides an analysis of government debt management using fiscal principles derived from the work of Michał Kalecki. Dividing the government’s budget into a “functional” and “financial” budget, Toporowski demonstrates how a financial budget balance—servicing government debt from taxes on wealth and profits that do not affect incomes and expenditures in the economy—allows a government to manage its debts without compromising the macroeconomic goals set in the functional budget. By splitting the budget into a functional budget that affects the real economy and a financial budget that just maintains debt payments and the liquidity of the financial system, the government can have two independent instruments that can be used to target, respectively, the macroeconomy and government debt—overcoming a dilemma that makes fiscal policy ineffective. This analysis also explains how pursuit of supply-side policies that result in a financial budget deficit and functional budget surplus can lead to slow growth, rising government debt, and financial instability.

  • Guaranteeing Employment during the Pandemic and Beyond


    Policy Note 2020/4 | May 2020 | Pavlina R. Tcherneva
    The ongoing job losses, already numbering in the tens of millions, and the mass unemployment that will remain once the COVID-19 crisis has passed are of our own making, argues Pavlina R. Tcherneva, created by our inability to conceive of policies that protect and create jobs on demand. There is another option: instead of capitulating to a world of guaranteed unemployment, we can demand policies that guarantee employment. During the pandemic, the government can protect jobs by acting as a kind of employer of last resort, while in the post-pandemic world it can create jobs directly via mass mobilization and a job guarantee. In this environment, backstopping payrolls, mass mobilization, and the job guarantee are three different but organically linked policies that aim to secure the right to decent, useful, and remunerative employment opportunities for all.

  • 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 Debt
    On 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 Omar

  • Public Service Employment


    Research Project Report, April 2018 | April 2018 | L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, Stephanie A. Kelton
    A Path to Full Employment
    Despite 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.

  • Can We Afford the Green New Deal?


    Public Policy Brief No. 148, 2020 | January 2020 | Yeva Nersisyan , L. Randall Wray
    In this policy brief, Yeva Nersisyan and Senior Scholar L. Randall Wray argue that assessing the “affordability” of the Green New Deal is a question of whether there are suitable and sufficient real resources than can be mobilized to implement this ambitious approach to climate policy. Only after a careful resource accounting can we address the question of whether taxes and other means might be needed to reduce private spending to avoid inflation as the Green New Deal is phased in.
     
    Nersisyan and Wray provide a first attempt at resource budgeting for the Green New Deal, weighing available resources—including potential excess capacity and resources that can be shifted away from existing production—against what will be needed to implement the major elements of this plan to fight climate change and ensure a just transition to a more sustainable economic model.

  • Macroeconomic and Microeconomic Impacts of Improving Physical and Social Infrastructure


    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 Tanzania
     
    Feminist 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.

  • The Macroeconomic Effects of Student Debt Cancellation


    Research Project Report, February 2018 | February 2018 | Scott Fullwiler, Stephanie A. Kelton, Catherine Ruetschlin, Marshall Steinbaum
    Among 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.
     

  • Are We All MMTers Now? Not so Fast


    One-Pager No. 63 | April 2020 | Yeva Nersisyan , L. Randall Wray
    As governments around the world explore ambitious approaches to fiscal and monetary policy in their responses to the COVID-19 crisis, Modern Money Theory (MMT) has been thrust into the spotlight once again. Unfortunately, many of those invoking the theory have misrepresented its central tenets, according Yeva Nersisyan and L. Randall Wray.

    MMT provides an analysis of fiscal and monetary policy applicable to national governments with sovereign, nonconvertible currencies. In the context of articulating the elements of that analysis, Nersisyan and Wray draw out one of the lessons to be learned from the pandemic and its policy responses: that the government’s ability to run deficits is not limited to times of crisis; that we must build up our supplies, infrastructure, and institutions in normal times, and not wait for the next crisis to live up to our means.

  • The "Kansas City" Approach to Modern Money Theory


    Working Paper No. 961 | July 2020 | L. Randall Wray
    Modern money theory (MMT) synthesizes several traditions from heterodox economics. Its focus is on describing monetary and fiscal operations in nations that issue a sovereign currency. As such, it applies Georg Friedrich Knapp’s state money approach (chartalism), also adopted by John Maynard Keynes in his Treatise on Money. MMT emphasizes the difference between a sovereign currency issuer and a sovereign currency user with respect to issues such as fiscal and monetary policy space, ability to make all payments as they come due, credit worthiness, and insolvency. Following A. Mitchell Innes, however, MMT acknowledges some similarities between sovereign and nonsovereign issues of liabilities, and hence integrates a credit theory of money (or, “endogenous money theory,” as it is usually termed by post-Keynesians) with state money theory. MMT uses this integration in policy analysis to address issues such as exchange rate regimes, full employment policy, financial and economic stability, and the current challenges facing modern economies: rising inequality, climate change, aging of the population, tendency toward secular stagnation, and uneven development. This paper will focus on the development of the “Kansas City” approach to MMT at the University of Missouri–Kansas City (UMKC) and the Levy Economics Institute of Bard College.

  • Fiscal Policy in Argentina, Brazil, and Mexico and the 2030 Agenda for Sustainable Development


    Working Paper No. 960 | July 2020 | Bendreff Desilus
    Fiscal policy is useful as a government instrument for supporting the economy, contributing to an increase in employment, and reducing inequality through more egalitarian income distribution. Over the past 30 years, developing countries have failed to increase their real wages due to the lack of domestic value-added in the era of globalization, where global supply chains are the driving factor for attracting foreign direct investment. Under such circumstances, the role of fiscal policy has become an important factor in creating the necessary conditions for boosting the economy. With the end of commodity-export-led growth, Mexico experienced a moderate reduction of 5 percent in poverty between 2014 and 2018 due to the structural adjustment of social policies and its economic and trade relationship with the United States; during the same period there has been no change in poverty in Argentina, and Brazil has suffered a rise in poverty. Following the global financial crisis, greater attention has been paid to fiscal policy in developed and developing countries—specifically Argentina, Brazil, and Mexico (ABM)—in order to attain macroeconomic stability. One of the consequences of the financial crisis is rising income inequality and its negative effects on economic growth. Over the past decade, fiscal policy has been adopted for the economic recovery. However, the recovery has been accompanied by a decrease in real wages of the middle class. The purpose of the present research is to critically examine the results of fiscal policy in ABM and the United Nations’ 2030 Agenda for Sustainable Development.

  • Summary Spring 2020


    Volume 29, No. 2 | June 2020
    This issue of the Summary features two Strategic Analyses. The first assesses the trends impacting the US economy’s sectoral balances in the context of overvalued asset markets and overleveraged corporate balance sheets; the second, for Greece, identifies the necessary conditions for achieving the government’s campaign promise of 4 percent GDP growth in 2020 and 2021, forecasting that even with an improvement in global conditions, Greece would still need private expenditure to surge to make more meaningful progress toward restoring household economic well-being to its precrisis levels. A policy brief presents an alternative approach to budgeting for the Green New Deal, much like the one outlined in John Maynard Keynes’s 1940 pamphlet, How to Pay for the War, that contrasts traditional questions about the program’s financial affordability with an approach that asks whether there are sufficient real resources that can be marshalled for its implementation.
     
    Working papers included in this issue addresses how Germany’s social and cultural values have affected European integration, while leaving them better able to weather the asymmetric effects of the eurocrisis they played a part in creating; examine four decades of demand shocks and their effect on output and productivity growth to ascertain if the recovery fits Alvin Hansen’s definition of “secular stagnation”; respond to a critique of a 2016 Cambridge Journal of Economics article on utilization in Kaleckian models of growth and distribution; explore two periods of financial instability associated with financial globalization in the modern era and how institutions meant to control financial fragility instead contributed to its development; investigate the Keynesian nature of the relationship between short- and long-term interest rates using data on daily yields of Canadian government securities; present an empirical stock-flow model for Denmark using data for 1995–2016 to demonstrate the effects of real economic behavior on balance sheets and vice versa; extend the Levy Institute’s model for Greece (LIMG) to assess the effectiveness of Greece’s internal devaluation policy; empirically model the wage differential between Palestinians in the West Bank and Gaza Strip based on refugee status; consider previous investigations of the impact of technical progress on employment growth; and question the origin of China’s low fertility rate in an attempt to disentangle the impacts of population control policies from the socioeconomic changes that accompany economic development.
     
     
    INSTITUTE RESEARCH
     
    Program: The State of the US and World Economies
    Strategic Analysis
    • DIMITRI B. PAPADIMITRIOU, MICHALIS NIKIFOROS, and GENNARO ZEZZA, Prospects and Challenges for the US Economy: 2020 and Beyond
    • DIMITRI B. PAPADIMITRIOU, MICHALIS NIKIFOROS, and GENNARO ZEZZA, Greece: In Search of Investors
    • YEVA NERSISYAN and L. RANDALL WRAY, Can We Afford the Green New Deal?
    • GEORGE ZESTOS and RACHEL N. COOKE, Challenges for the EU as Germany Approaches Recession
    • MICHALIS NIKIFOROS, Demand, Distribution, Productivity, Structural Change, and (Secular?) Stagnation
    • MICHALIS NIKIFOROS, On the “Utilization Controversy”: A Rejoinder and Some Comments
     
    Program: Monetary Policy and Financial Structure
    • MARIO TONVERONACHI, Ages of Financial Instability
    • TANWEER AKRAM and ANUPAM DAS, The Empirics of Canadian Government Securities Yields
    • MIKAEL RANDRUP BYRIALSEN and HAMID RAZA, An Empirical Stock-Flow Consistent Macroeconomic Model for Denmark
     
    Program: Employment Policy and Labor Markets
    • CHRISTOS PIERROS, A Labor Market–Augmented Empirical Stock-Flow Consistent Model Applied to the Greek Economy
    • JESUS FELIPE, DONNA FAYE BAJARO, GEMMA ESTRADA, and JOHN MCCOMBIE, The Relationship between Technical Progress and Employment: A Comment on Autor and Salomons
    • SAMEH HALLAQ, Wage Differential between Palestinian Non-refugees and Palestinian Refugees in the West Bank and Gaza
     
    Program: Explorations in Theory and Empirical Analysis
    • LIU QIANG, FERNANDO RIOS-AVILA, and HAN JIQIN, Is China’s Low Fertility Rate Caused by the Population Control Policy?
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  • A Great Leap Forward


    Book Series, January 2020 | January 2020 | L. Randall Wray
    Heterodox Economic Policy for the 21st Century
    A 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
Ford-Levy Institute Projects
 
Levy Institute Publications in Greek

From the Press Room

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 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 <em>The Guardian</em>

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

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

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

OpEd: Don’t let politics derail Greece’s economic recovery