Research Programs
The State of the US and World Economies
This program's central focus is the use of Levy Institute macroeconomic models in generating strategic analyses of the US and world economies. The outcomes of alternative scenarios are projected and analyzed, with the results—published as Strategic Analysis reports—serving to help policymakers understand the implications of various policy options.The Levy Institute macroeconomic models, created by Distinguished Scholar Wynne Godley, are accounting based. The US model employs a complete and consistent system (in that all sectors “sum up,” with no unaccounted leakages) of stocks and flows (such as income, production, and wealth). The world model is a “closed” system, in which 11 trading blocs—of which the United States, China, Japan, and Western Europe are four—are represented. This model is based on a matrix in which each bloc’s imports are described in terms of exports from the other 10 blocs. From this information, and using alternative assumptions (e.g., growth rates, trade shares, and energy demands and supplies), trends are identified and patterns of trade and production analyzed.
The projections derived from the models are not presented as short-term forecasts. The aim is to display, based on analysis of the recent past, what it seems reasonable to expect if current trends, policies, and relationships continue. To inform policy, it is not necessary to establish that a particular projection will come to pass, but only that it is something that must be given serious consideration as a possibility. The usefulness of such analyses is strategic: they can serve to warn policymakers of potential dangers and serve as a guide to policy instruments that are available, or should be made available, to deal with those dangers, should they arise.
United States
-
Working Paper No. 1052 | June 2024For Matías Vernengo and Esteban Pérez Caldentey (2020), the MMT literature overemphasizes the choice of the exchange rate regime and the relevance of a flexible exchange rate regime, as well as the ultimate effect of that choice upon the policy space. In addition, they argue that the role of capital flows is underexplored, and that the relevance of the balance-of-payments constraint is often underestimated. Vernengo and Pérez’s criticism fails to consider that exchange-rate flexibility makes it possible to use flexible fiscal and monetary policies as well, to boost growth and employment, and to reduce the balance-of-payments constraint.Download:Associated Program(s):Author(s):Arturo Huerta G.Related Topic(s):Capital mobility Currency regimes Exchange rates Fiscal policy Foreign exchange Government expenditure Interest rates Monetary policyRegion(s):United States, Latin America
Strategic Analysis | June 2024In this report, Institute President Dimitri B. Papadimitriou, Research Scholar Giuliano T. Yajima, and Senior Scholar Gennaro Zezza discuss the rapid recovery of the US economy in the post-pandemic period. They find that robust consumption and investment and a relaxation of fiscal policy were the key drivers of accelerated GDP growth—however, the signs that the same rapid rate of growth will continue are not encouraging. In the authors’ assessment, projections relying on significant increases in private sector expenditures, including residential investment, are doubtful unless the relaxation of fiscal policy continues; both the household and corporate sectors will be deleveraging instead of increasing spending; the trade balance will continue along its same path in a deficit position; and the run up in the stock market carries significant downside risks.Download:Associated Program:Author(s):Related Topic(s):Economic policy Economic recovery Economic stability Economic well-being GDP growth Household income ProductivityRegion(s):United StatesWorking Paper No. 1049 | May 2024We argue that the US trade and industry sector has experienced several unsustainable sectoral processes, including (i) a fall in the trade balance in machinery and equipment and high-tech (HT) industries, (ii) a rise in import multipliers in machinery and equipment and HT industries, (iii) a fall in the manufacturing share of GDP in machinery and equipment and HT industries, (iv) a rise in commodities share of GDP, (v) a fall in the wage share, (vi) structural shifts in the consumption share of wages, and (vii) a fall in employment multipliers for the US, particularly in manufacturing. To address these issues, the US must shift toward a more sustainable and value-added economy with a focus on innovation and investment in high-tech industries, renewable energy, and sustainable agriculture. Additionally, policies must be put in place to address the negative impacts of resource extraction and to promote a more equitable distribution of income and wealth.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 1042 | February 2024For more than 25 years, the Social Security Trust Fund was projected to run out of money in 2033 (give or take a few years), potentially causing benefits to be severely reduced in the absence of corrective legislative action. Today (February 2024), projections are made by the Social Security Administration that indicate that future benefits will need to be reduced by roughly 25 percent or taxes will need to be increased by about 33 percent, or some combination to avoid benefit curtailment. While Congress will most probably prevent benefits from being reduced for retirees and those nearing retirement, the longer Congress and the president take to address the shortfall, the more politically unpalatable (and possibly draconian) the solutions will be for all others.
Dozens of proposals are being evaluated to address the long-term problem by mainstream benefits experts, economists, think tanks, politicians, and government agencies but, with rare exceptions from a few economists, none address the short-term problem of Trust Fund depletion, provide a workable roadmap for the long-term challenges, or consider fundamental financing differences between the federal government and the private sector.
This paper aims to address these issues by suggesting legislative changes that will protect the Social Security system indefinitely, help ensure the adequacy of benefits for retirees and their survivors and dependents, and remove confusing and misleading legislative and administrative complexity. In making recommendations, this paper will demonstrate that the Social Security Trust Funds, while legally distinct, are essentially an artificial accounting contrivance within the US Treasury that have become a tool to force program changes that, for ideological reasons, will likely shift an increasing financial burden onto those who can least bear it. Finally, while the focus of this paper is on the Social Security system, it would be incomplete without also addressing, albeit in a limited way, the larger political issue of the nation’s debt and deficit along with the implications for inflation.Download:Associated Program(s):Author(s):Edward LaneRelated Topic(s):Deficit financing Deficits Inflation Social Security Tax policy Treasury Welfare economics Welfare policy Welfare stateRegion(s):United StatesStrategic Analysis | July 2023In this Strategic Analysis, Dimitri B. Papadimitriou, Michalis Nikiforos, Giuliano T. Yajima, and Gennaro Zezza discuss how the current state and structural features of the US economy might affect its future trajectory. The recent recovery after the pandemic has been remarkable, when compared to previous cycles, and offers evidence of the efficacy of fiscal policy. Moreover, the inflation rate has been finally decelerating as the problems in global value chains that emerged after the pandemic are resolving and the price of commodities and oil, which spiked after the pandemic and the war in Ukraine, are stabilizing.
Yet despite the recent success of fiscal policy in promoting output and employment growth, the recent debt ceiling deal—culminating in the 2023 Fiscal Responsibility Act—risks putting the US economy on the austerity path of the previous decade. And given the structural weaknesses of the US economy—including its high current account deficits, high level of indebtedness of firms, and overvalued stock and real estate prices—this projected fiscal policy tightening, combined with the impacts of high interest rates, could lead to a significant slowdown of the US economy.
The US economy, the authors contend, is in need of a structural transformation toward modernizing its infrastructure, promoting industrial policy, and investing in the greening of its economy and environmental sustainability. A necessary condition for achieving these goals is an increase in government expenditure; they show that such an increase could also have positive demand effects on output and employment.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesPolicy Note 2023/1 | May 2023In 2022, Greek GDP grew at a higher rate than the eurozone average as the nation’s economy rebounded from the COVID-19 shock.
However, it was not all welcome news. In particular, Greece registered its largest current account deficit since 2009. Despite a widespread focus on fiscal profligacy, it is excessive current account and trade deficits—largely caused by private sector imbalances—that are at the root of Greece’s multiple economic challenges. This policy note identifies the major determinants causing the deterioration of the current account balance in order to devise appropriate corrective policies.Download:Associated Program:Author(s):Related Topic(s):COVID-19 Current account imbalances Deficits Eurozone Greece Greek economic crisis Sectoral balancesRegion(s):United States, EuropeWorking Paper No. 1018 | April 2023How to Deal with the “Demographic Time Bomb”
The aging of the global population is in the headlines following a report that China’s population fell as deaths surpassed births. Pundits worry that a declining Chinese workforce means trouble for other economies that have come to rely on China’s exports. France is pushing through an increase of the retirement age in the face of what is called a demographic “time bomb” facing rich nations, created by rising longevity and low birthrates. As we approach the debt limit in the US, while President Biden has promised to protect Social Security, many have returned to the argument that the program is financially unsustainable. This paper argues that most of the discussion and policy solutions proposed surrounding aging of populations are misfocused on supposed financial challenges when they should be directed toward the challenges facing resource provision. From the resource perspective, the burden of caring for tomorrow’s seniors seems far less challenging. Indeed, falling fertility rates and an end to global population growth should be welcomed. With fewer children and longer lives, investment in the workers of the future will ensure growth of productivity that will provide the resources necessary to support a higher ratio of retirees to those of working age. Global population growth will peak and turn negative, reducing demands on earth’s biosphere and making it easier to transition to environmental sustainability. Rather than facing a demographic “time bomb,” we can welcome the transition to a mature-aged profile.Download:Associated Program:Author(s):Related Topic(s):Birth rate Demographic trends Population control policy Social Security Unpaid care work Unpaid laborRegion(s):United States, AsiaWorking Paper No. 1017 | April 2023This paper revisits a traditional theme in the literature on the political economy of development, namely how to redistribute rents from traditional exporters of natural resources toward capitalists in technology-intensive sectors with a higher potential for innovation and the creation of higher-productivity jobs. Porcile and Lima argue that this conflict has been reshaped in the past three decades by two major transformations in the international economy. The first is the acceleration of technical change and the key role governments play in supporting international competitiveness. This role provides the strategic public goods to foster innovation and the diffusion of technology (what Christopher Freeman called “technological infrastructure”). The second is the impact of financial globalization in limiting the ability of governments in the periphery to tax and/or issue debt to finance those public goods. Capital mobility allows exporters of natural resources to send their foreign exchange abroad to arbitrate between domestic and foreign assets, and to avoid taxation. Using a macroeconomic model for a small, open economy, the authors argue that in this more complex international context, the external constraint on output growth assumes different forms. They focus on two polar cases: the “pure financialization” case, in which legal and illegal capital flights prevent the government from financing the provision of strategic public goods; and the “trade deficit” case, in which private firms in the more technology-intensive sector cannot import the capital goods they need to expand industrial production.Download:Associated Program:Author(s):Gabriel Porcile Gilberto Tadeu LimaRelated Topic(s):Region(s):United StatesWorking Paper No. 1015 | February 2023Fractional reserve regimes generate fragile banking, and full reserve regimes (e.g., narrow banking) remove fragility at the cost of suppressing the role of banks as lenders. A Central Bank Digital Currency (CBDC) could provide safe money, but at the cost of potentially disrupting bank lending. Our aim is to avoid this potential disruption. Building on the recent literature on CBDCs, in this study we propose what we call the “CBDC next-level model,” whereby the central bank creates money by lending to banks, and banks on-lend the proceeds to the economy. The proposed model would allow for deposits to be taken off the balance sheet of banks and into the balance sheet of the central bank, thereby removing significant risk from the banking system without adversely impacting banks’ basic business. Once CBDC is injected in the system, irrespective of however it is used, wherever it accumulates, and whoever holds and uses it, it will always represent central bank equity, and no losses or defaults by individual banks or borrowers can ever dent it or weaken the central bank’s capital position or hurt depositors. Yet, individual borrowers and banks would still be required to honor their debt in full, lest they would be bound to exit the market or even be forced into bankruptcy. The CBDC next-level model solution would eliminate the threat of bank runs and system collapse and induce a degree of financial stability (“super-stability”) that would be unparalleled by any existing banking system.Download:Associated Program:Author(s):Biagio Bossone Michael HainesRelated Topic(s):Banking Banks Central bank policy Central banking Commercial banking Currency issuers vs. currency users Full-reserve banking Monetary policy Money and banking Money creation Seigniorage StabilityRegion(s):United StatesWorking Paper No. 1013 | January 2023A Sectoral Multiplier Analysis for the United States
We assess the sectoral impact of the implementation of a “green” employer of last resort (ELR) program in the US, based on an environmental modification of an extended Kurz’s (1985) multiplier framework and data from OECD Input-Output tables. We use these multipliers to estimate the impact of an “optimal” ELR, designed to maximize the impact on both output and employment while minimizing both imports and carbon emissions. We then test several alternative policy scenarios based upon different compositions of US government expenditure. We provide evidence that (1) investing in the optimal sectors in terms of output, employment, Co2, and import multipliers does not always deliver optimal results in the aggregate; (2) ecological sustainability for the US economy also fosters import sustainability; (3) a rebounding effect in Co2 emissions may be tamed if the ELR satisfies the abovementioned optimality condition, though this undermines its success in terms of output and employment.Download:Associated Program(s):The State of the US and World Economies Climate Change and Economic Policy Economic Policy for the 21st CenturyAuthor(s):Related Topic(s):Climate Change and Economic Policy Employer of Last Resort (ELR) policy Employment guarantee Green jobs Green New Deal Job guarantee Structural changeRegion(s):United StatesOne-Pager | December 2022While the trigger for the Covid recession was unusual—a collapse of the supply side that produced a drop in demand—the inflation the US economy is now facing is not atypical, according to L. Randall Wray. In this one-pager, he explores the causes of the current inflationary environment, arguing that continuing inflation pressures come mostly from the supply side.
Wray warns that, given federal spending had already been declining substantially before the Fed started raising interest rates, rate hikes make a recession—and potentially stagflation—even more likely. A key part of our fiscal policy response should be focused on well-designed public investment addressing the substantial supply constraints still affecting the US economy—constraints that are not just due to the Covid crisis, but also decades of underinvestment in infrastructure. Such an approach, in Wray's view, would reduce inflationary pressures while supporting growth.
Download:Associated Program(s):The State of the US and World Economies Monetary Policy and Financial Structure Federal Budget PolicyAuthor(s):Related Topic(s):Region(s):United StatesStrategic Analysis | August 2022The Fed Conundrum
In this report, Institute President Dimitri B. Papadimitriou, Research Scholar Michalis Nikiforos, and Senior Scholar Gennaro Zezza analyze how and why the US economy has achieved a swift recovery in comparison with the last few economic cycles.
This recovery has nevertheless been accompanied by significant increases in the trade deficit and inflation. Papadimitriou, Nikiforos, and Zezza argue that the elevated rate of inflation has been largely unrelated to the level of demand or the pace of the recovery, and has more to do with pandemic-related disruptions, the war in Ukraine, and the beginning of a new commodity super cycle.
The authors also identify persistent Minskyan processes that mean the US economy remains fundamentally unstable, with a risk of financial crisis and potentially severe consequences in terms of output and employment—a risk heightened by the reversal of the loose monetary policy that has prevailed over the last decade and a half. In their first scenario, they simulate the macroeconomic impact of such a financial crisis and private sector deleveraging. In two additional scenarios, the authors analyze the likely effects of a new round of fiscal stimulus that would be necessary in case of a crisis: a deficit-financed expenditure boost with no offsetting revenue increases, and a deficit-neutral scenario in which taxation of high-income households increases by an amount equivalent to the expansion of public expenditure.Download:Associated Program:Author(s):Region(s):United StatesPublic Policy Brief No. 157 | April 2022The Fed Cannot Engineer a Soft Landing but Risks Stagflation by Trying
Roughly two years into the economic recovery from the COVID-19 crisis, the topic of elevated inflation dominates the economic policy discourse in the United States. And the aggressive use of fiscal policy to support demand and incomes has commonly been singled out as the culprit. Equally as prevalent is the clamor for the Federal Reserve to raise interest rates to relieve inflationary pressures. According to Research Scholar Yeva Nersisyan and Senior Scholar L. Randall Wray, this narrative is flawed in a number of ways. The problem with the US economy is not one of excess of demand in their view, and the Federal Reserve will not be able to engineer a “soft landing” in the way many seem to be expecting. The authors also deliver a warning: excessive tightening, combined with headwinds in 2022, could lead to stagflation. Moreover, while this recovery looks robust in comparison to the jobless recoveries and secular stagnation that have typified the last few decades, in Nersisyan and Wray’s estimation there are few signs of an overheating economy to be found in the macro data. In their view, this inflation is not centrally demand driven; rather dynamics at the micro-level are playing a much more central role in driving the price increases in question, while significant supply chain problems have curtailed productive capacity by disrupting the availability of critical inputs.
The authors suggest there is a better way to conduct policy—one oriented around targeted investments that would increase our real resource space. This will serve not only to address inflationary pressures, according to Nersisyan and Wray, but also the far more pressing climate emergency.Download:Associated Program:Author(s):Region(s):United StatesWorking Paper No. 1003 | March 2022Pandemic or Policy Response?
This paper examines the recent increase of the measured inflation rate to assess the degree to which the acceleration is due to problems created (largely on the supply side) by the pandemic versus pressures created on the demand side by pandemic relief. Some have attributed the inflation to excess demand, most notably Larry Summers, who had warned that the pandemic relief spending was too great. As evidence, one could point to the quick recovery of GDP and to reportedly tight labor markets. Others have variously blamed supply chain disruptions, shortages of certain inputs, OPEC’s oil price increases, labor market disruptions because of COVID, and rising profit margins obtained through exercise of pricing power. We conclude that there is little evidence that excess demand is the problem, although we agree that in the absence of the relief checks, recovery would have been sufficiently slow to minimize inflation pressure. We closely examine the main contributors to rising overall prices and conclude that tighter monetary policy would not be an effective way to reduce price pressures. We also cast doubt on the expectations theory of inflation control. We present evidence that suggests there is currently little danger that higher inflation will become entrenched. If anything, rate hikes now will make it harder for the economy to adjust to current realities. The potential for lots of pain with little gain is great. The best course of action is to tackle problems on the supply side.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesOne-Pager No. 69 | February 2022A recent article in the New York Times asks whether Modern Money Theory (MMT) can declare victory after its policies were (supposedly) implemented during the response to the COVID-19 pandemic. The article suggests yes, but for the high inflation it sparked. In the view of Yeva Nersisyan and Senior Scholar L. Randall Wray, the federal government’s response largely validated MMT’s claims regarding public debt and deficits and questions of sovereign government solvency—it did not, however, represent MMT policy.Download:Associated Program(s):Author(s):Region(s):United StatesWorking Paper No. 1001 | February 2022This paper estimates the distribution-led regime of the US economy for the period 1947–2019. We use a time varying parameter model, which allows for changes in the regime over time. To the best of our knowledge this is the first paper that has attempted to do this. This innovation is important, because there is no reason to expect that the regime of the US economy (or any economy for that matter) remains constant over time. On the contrary, there are significant reasons that point to changes in the regime. We find that the US economy became more profit-led in the first postwar decades until the 1970s and has become less profit-led since; it is slightly wage-led over the last fifteen years.Download:Associated Program(s):Author(s):Paul Carrillo-Maldonado Michalis NikiforosRelated Topic(s):Region(s):United StatesWorking Paper No. 999 | January 2022Does Financial “Bonanza” Cause Premature Deindustrialization?
The outbreak of COVID-19 brought back to the forefront the crucial importance of structural change and productive development for economic resilience to economic shocks. Several recent contributions have already stressed the perverse relationship that may exist between productive backwardness and the intensity of the COVID-19 socioeconomic crisis. In this paper, we analyze the factors that may have hindered productive development for over four decades before the pandemic. We investigate the role of (non-FDI) net capital inflows as a potential source of premature deindustrialization. We consider a sample of 36 developed and developing countries from 1980 to 2017, with major emphasis on the case of emerging and developing economies (EDE) in the context of increasing financial integration. We show that periods of abundant capital inflows may have caused the significant contraction of manufacturing share to employment and GDP, as well as the decrease of the economic complexity index. We also show that phenomena of “perverse” structural change are significantly more relevant in EDE countries than advanced ones. Based on such evidence, we conclude with some policy suggestions highlighting capital controls and external macroprudential measures taming international capital mobility as useful tools for promoting long-run productive development on top of strengthening (short-term) financial and macroeconomic stability.Download:Associated Program:Author(s):Related Topic(s):Region(s):United States, Latin America, Europe, Middle East, Africa, AsiaOne-Pager No. 68 | November 2021With the US Treasury cutting checks totaling approximately $5 trillion to deal with the COVID-19 crisis, Senior Scholar L. Randall Wray argues that when it comes to the federal government, concerns about affordability and solvency can both be laid to rest. According to Wray, the question is never whether the federal government can spend more, but whether it should. And while there are still strongly held beliefs about the negative impacts of deficits and debt on inflation, interest rates, growth, and exchange rates, with two centuries of experience the evidence for these concerns is mixed at best.Download:Associated Program(s):Author(s):Related Topic(s):Federal budget policy Federal debt Federal deficit Inflation Modern Money Theory (MMT) Monetary policyRegion(s):United StatesWorking Paper No. 993 | September 2021Theory and Empirics
This paper provides a theoretical and empirical reassessment of supermultiplier theory. First, we show that, as a result of the passive role it assigns to investment, the Sraffian supermultiplier (SSM) predicts that the rate of utilization leads the investment share in a dampened cycle or, equivalently, that a convergent cyclical motion in the utilization-investment share plane would be counterclockwise. Second, impulse response functions from standard recursive vector autoregressions (VAR) for postwar US samples strongly indicate that the investment share leads the rate of utilization, or that these cycles are clockwise. These results raise questions about the key mechanism underlying supermultiplier theory.Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United Statese-pamphlets | August 2021Modern Money Theory (MMT) has been frequently mentioned in recent media—first as “crazy talk” that if followed would bankrupt the nation and then, after the COVID-19 pandemic hit, as a way to finance an emergency response. In recent months, however, Washington seems to have returned to the old view that government spending must be “paid for” with new taxes. This raises the question: Has MMT really made headway with policymakers? This e-pamphlet examines the extraordinary interview given recently by Representative John Yarmuth’s (D, KY-03), Chair of the House Budget Committee, in which he explicitly adopts an MMT approach to budgeting. Chairman Yarmuth also lays out a path for realizing the major elements of President Biden’s proposals. Finally, Wray summarizes a recent presentation he gave to the Congressional Budget Office’s Macroeconomic Analysis section that urged reconsideration of the way that fiscal policy impacts are assessed.Download:Associated Program(s):Monetary Policy and Financial Structure Economic Policy for the 21st Century The State of the US and World EconomiesAuthor(s):Related Topic(s):Region(s):United StatesPublic Policy Brief No. 155 | June 2021Yes, If He Abandons Fiscal “Pay Fors"
President Biden’s proposals for investing in social and physical infrastructure signal a return to a budget-neutral policymaking framework that has largely been set aside since the outbreak of the COVID-19 crisis. According Yeva Nersisyan and L. Randall Wray, this focus on ensuring revenues keep pace with spending increases can undermine the goals internal to both the public investment and tax components of the administration’s plans: the “pay for” approach limits our spending on progressive policy to what we can raise through taxes, and we will only tax the amount we need to spend.
Nersisyan and Wray propose an alternative approach to budgeting for large-scale public expenditure programs. In their view, policymakers should evaluate spending and tax proposals on their own terms, according to the goals each is intended to meet. If the purpose of taxing corporations and wealthy individuals is to reduce inequality, then the tax changes should be formulated to accomplish that—not to “raise funds” to finance proposed spending. And while it is possible that general tax hikes might be needed to prevent public investment programs from fueling inflation, they argue that the kinds of taxes proposed by the administration would do little to relieve inflationary pressures should they arise. Under current economic circumstances, however, the president’s proposed infrastructure spending should not require budgetary offsets or other measures to control inflation in their estimation.Download:Associated Program(s):Author(s):Region(s):United StatesPress Releases | June 2021Download:Associated Program:Author(s):Mark PrimoffRelated Topic(s):Region(s):United StatesStrategic Analysis | June 2021In this report, Institute President Dimitri B. Papadimitriou and Research Scholars Michalis Nikiforos and Gennaro Zezza analyze how the US economy was affected by the pandemic and its prospects for recovery.
Their baseline simulation using the Institute’s stock-flow macroeconometric model shows a significant pickup in the growth rate in 2021 as a result of the American Rescue Plan Act. The report includes two additional scenarios simulated on top of the baseline, finding that President Biden’s infrastructure and families plans—whether paired with offsetting tax increases on high-earners or “deficit financed”—would have positive macroeconomic effects. Additionally, Papadimitriou, Nikiforos, and Zezza warn that if US policymakers do not prioritize decreasing the trade deficit, maintaining growth will require either continuous and very high government deficits or the private sector once again becoming a net borrower.
Finally, they argue that concerns about a sharp increase in inflation spurred by the fiscal stimulus are unwarranted: the US economy was not close to full employment or full utilization of resources before the pandemic, and the propagation mechanisms that could lead to accelerating inflation are not in place.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 989 | June 2021The paper provides an empirical discussion of the national emergency utilization rate (NEUR), which is based on a “national emergency” definition of potential output and is published by the US Census Bureau. Over the peak-to-peak period 1989–2019, the NEUR decreased by 14.2 percent. The paper examines the trajectory of potential determinants of capacity utilization over the same period as specified in the related theory, namely: capital intensity, relative prices of labor and capital, shift differentials, rhythmic variations in demand, industry concentration, and aggregate demand. It shows that most of them have moved in a direction that would lead to an increase in utilization. The main factor that can explain the decrease in the NEUR is aggregate demand, while the increase in industry concentration might have also played a small role.Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United StatesPress Releases | April 2021Download:Associated Program:Author(s):Mark PrimoffRegion(s):United States, EuropeOne-Pager No. 65 | February 2021With 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):Related Topic(s):Region(s):United StatesPublic Policy Brief No. 154 | February 2021Let Us Look Seriously at the Clearing Union
This 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):Jan KregelRelated Topic(s):Region(s):United States, EuropePolicy Note 2020/6 | October 2020As 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):Jan KregelRelated Topic(s):Region(s):United StatesWorking Paper No. 971 | September 2020In a seminal 1972 paper, Robert M. May asked: “Will a Large Complex System Be Stable?” and argued that stability (of a broad class of random linear systems) decreases with increasing complexity, sparking a revolution in our understanding of ecosystem dynamics. Twenty-five years later, May, Levin, and Sugihara translated our understanding of the dynamics of ecological networks to the financial world in a second seminal paper, “Complex Systems: Ecology for Bankers.” Just a year later, the US subprime crisis led to a near worldwide “great recession,” spread by the world financial network. In the present paper we describe highlights in the development of our present understanding of stability and complexity in network systems, in order to better understand the role of networks in both stabilizing and destabilizing economic systems. A brief version of this working paper, focused on the underlying theory, appeared as an invited feature article in the February 2020 Society for Chaos Theory in Psychology and the Life Sciences newsletter (Hastings et al. 2020).Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United StatesPress Releases | March 2020Download:Associated Program:Author(s):Mark PrimoffRelated Topic(s):Region(s):United StatesPolicy Note 2020/1 | March 2020The Economic Implications of the Pandemic
The spread of the new coronavirus (COVID-19) is a major shock for the US and global economies. Research Scholar Michalis Nikiforos explains that we cannot fully understand the economic implications of the pandemic without reference to two Minskyan processes at play in the US economy: the growing divergence of stock market prices from output prices, and the increasing fragility in corporate balance sheets.
The pandemic did not arrive in the context of an otherwise healthy US economy—the demand and supply dimensions of the shock have aggravated an inevitable adjustment process. Using a Minskyan framework, we can understand how the current economic weakness can be perpetuated through feedback effects between flows of demand and supply and their balance sheet impacts.Download:Associated Program(s):Author(s):Related Topic(s):COVID-19 Economic crisis Financial crisis Hyman Minsky Instability Private sector debt Recession Stock markets Stock-flow consistencyRegion(s):United StatesPress Releases | March 2020Download:Associated Program:Author(s):Mark PrimoffRelated Topic(s):Region(s):United StatesOne-Pager No. 62 | March 2020As the coronavirus (COVID-19) spreads across the United States, it has become clear that, in addition to the public health response (which has been far less than adequate), an economic response is needed. Yeva Nersisyan and Senior Scholar L. Randall Wray identify four steps that require immediate attention: (1) full coverage of medical costs associated with testing and treatment of COVID-19; (2) mandated paid sick leave and full coverage of associated costs; (3) debt relief for families; and (4) swift deployment of testing and treatment facilities to underserved communities.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesOne-Pager No. 61 | March 2020The rapidly growing uncertainty about the potential global fallout from an emerging pandemic is occurring against a background in which there is evidence US corporate sector balance sheets are significantly overstretched, exhibiting a degree of fragility that, according to some measures, is unmatched in the postwar historical record. The US economy is vulnerable to a shock that could trigger a cascade of falling asset prices and private sector deleveraging, with severe consequences for both the real and financial sides of the economy.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 945 | January 2020The present paper emphasizes the role of demand, income distribution, endogenous productivity reactions, and other structural changes in the slowdown of the growth rate of output and productivity that has been observed in the United States over the last four decades. In particular, it is explained that weak net export demand, fiscal conservatism, and the increase in income inequality have put downward pressure on demand. Up until the crisis, this pressure was partially compensated for through debt-financed expenditure on behalf of the private sector, especially middle- and lower-income households. This debt overhang is now another obstacle in the way of demand recovery. In turn, as emphasized by the Kaldor-Verdoorn law and the induced technical change approach, the decrease in demand and the stagnation of wages can lead to an endogenous slowdown in productivity growth. Moreover, it is argued that the increasingly oligopolistic and financialized structure of the US economy also contributes to the slowdown. Finally, the paper argues that there is nothing secular about the current stagnation; addressing the aforementioned factors can allow for growth to resume, as has happened in the past.Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United StatesPublic Policy Brief No. 148 | January 2020In 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.Download:Associated Program(s):The State of the US and World Economies Economic Policy for the 21st Century Climate Change and Economic PolicyAuthor(s):Related Topic(s):Region(s):United StatesStrategic Analysis | January 20202020 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.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 940 | November 2019A Rejoinder and Some Comments
The critique by Gahn and González (2019) of the conclusions in Nikiforos (2016) regarding what data should be used to evaluate whether capacity utilization is endogenous to demand is weak for the following reasons: (i) The Federal Reserve Board (FRB) measure of utilization is not appropriate for measuring long-run variations of utilization because of the method and purpose of its construction. Even if its difference from the measures of the average workweek of capital (AWW) were trivial, this would still be the case; if anything, it would show that the AWW is also an inappropriate measure. (ii) Gahn and González choose to ignore the longest available estimate of the AWW produced by Foss, which has a clear long-run trend. (iii) Their econometric results are not robust to more suitable specifications of the unit root tests. Under these specifications, the tests overwhelmingly fail to reject the unit root hypothesis. (iv) Other estimates of the AWW, which were not included in Nikiforos (2016) confirm these conclusions. (v) For the comparison between the AWW series and the FRB series, they construct variables that are not meaningful because they subtract series in different units. When the comparison is done correctly, the results confirm that the difference between the AWW series and the FRB series has a unit root. (vi) A stationary utilization rate is not consistent with any theory of the determination of capacity utilization. Even if demand did not play a role, there is no reason to expect that all the other factors that determine utilization would change in a fashion that would keep utilization constant.Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 934 | August 2019This paper analyzes the dynamics of long-term US Treasury security yields from a Keynesian perspective using daily data. Keynes held that the short-term interest rate is the main driver of the long-term interest rate. In this paper, the daily changes in long-term Treasury security yields are empirically modeled as a function of the daily changes in the short-term interest rate and other important financial variables to test Keynes’s hypothesis. The use of daily data provides a long time series. It enables the extension of earlier Keynesian models of Treasury security yields that relied on quarterly and monthly data. Models based on higher-frequency daily data from financial markets—such as the ones presented in this paper—can be valuable to investors, financial analysts, and policymakers because they make it possible for a real-time fundamental assessment of the daily changes in long-term Treasury security yields based on a wide range of financial variables from a Keynesian perspective. The empirical findings of this paper support Keynes’s view by showing that the daily changes in the short-term interest rate are the main driver of the daily changes in the long-term interest rate on Treasury securities. Other financial variables, such as the daily changes in implied volatility of equity prices and the daily changes in the exchange rate, are found to have some influence on Treasury yields.Download:Associated Program(s):Author(s):Tanweer Akram Anupam DasRelated Topic(s):Government bond yields Long-term interest rates Monetary policy Securities markets Short-term interest ratesRegion(s):United StatesOne-Pager No. 60 | July 2019Senators Elizabeth Warren and Bernie Sanders, along with Representative Alexandria Ocasio-Cortez, recently proposed to increase the rate of taxation on very high incomes and net worth. One of the primary justifications for such policies is that reducing inequality would help safeguard political equality. However, Dimitri B. Papadimitriou, Michalis Nikiforos, and Gennaro Zezza show how these tax policies, if matched by comparable increases in government spending, have the potential to boost aggregate demand while helping reform the unstable structure of the US economy.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 931 | May 2019This paper follows the methodology developed by J. M. Keynes in his How to Pay for the War pamphlet to estimate the “costs” of the Green New Deal (GND) in terms of resource requirements. Instead of simply adding up estimates of the government spending that would be required, we assess resource availability that can be devoted to implementing GND projects. This includes mobilizing unutilized and underutilized resources, as well as shifting resources from current destructive and inefficient uses to GND projects. We argue that financial affordability cannot be an issue for the sovereign US government. Rather, the problem will be inflation if sufficient resources cannot be diverted to the GND. And if inflation is likely, we need to put in place anti-inflationary measures, such as well-targeted taxes, wage and price controls, rationing, and voluntary saving. Following Keynes, we recommend deferred consumption as our first choice should inflation pressures arise. We conclude that it is likely that the GND can be phased in without inflation, but if price pressures do appear, deferring a small amount of consumption will be sufficient to attenuate them.Download:Associated Program(s):The State of the US and World Economies Economic Policy for the 21st Century Climate Change and Economic PolicyAuthor(s):Related Topic(s):Region(s):United StatesWorking Paper No. 929 | May 2019Increases in the federal funds rate aimed at stabilizing the economy have inevitably been followed by recessions. Recently, peaks in the federal funds rate have occurred 6–16 months before the start of recessions; reductions in interest rates apparently occurred too late to prevent those recessions. Potential leading indicators include measures of labor productivity, labor utilization, and demand, all of which influence stock market conditions, the return to capital, and changes in the federal funds rate, among many others. We investigate the dynamics of the spread between the 10-year Treasury rate and the federal funds rate in order to better understand “when to ease off the (federal funds) brakes.”Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United StatesPolicy Note 2019/2 | May 2019Against the background of an ongoing trade dispute between the United States and China, Senior Scholar Jan Kregel analyzes the potential for achieving international adjustment without producing a negative impact on national and global growth. Once the structure of trade in the current international system is understood (with its global production chains and large imbalances financed by international borrowing and lending), it is clear that national strategies focused on tariff adjustment to reduce bilateral imbalances will not succeed. This understanding of the evolution of the structure of trade and international finance should also inform our view of how to design a new international financial system capable of dealing with increasingly large international trade imbalances.Download:Associated Program(s):Author(s):Jan KregelRelated Topic(s):Capital flows Current account imbalances International finance International trade Tariffs Trade imbalancesRegion(s):United States, AsiaPress Releases | April 2019Study Finds that Proposals to Increase Tax Rates of the Very Rich
Will Provide a Macroeconomic Boost if Matched by Increases in Public SpendingDownload:Associated Program:Author(s):Mark PrimoffRegion(s):United StatesStrategic Analysis | April 2019Although the ongoing recovery is about to become the longest in the history of the United States, it is also the weakest in postwar history, and as we enter the second quarter of 2019, many clouds have gathered.
This Strategic Analysis considers the recent trajectory, the present state, and the future prospects of the US economy. The authors identify four main structural problems that explain how we arrived at the crisis of 2007–09 and why the recovery that has followed has been so weak—as well as why the prospect of a recession is increasingly likely.
The US economy is in need of deep structural reforms that will deal with these problems. This report analyzes a pair of policies that begin to move in that direction, both involving an increase in the tax rate for high-income and high-net-worth households. Even if the primary justification for these policies is not economic, this report shows that if such an increase in taxes is accompanied by an equivalent increase in government outlays, the redistributive impact will have a positive macroeconomic effect while moving the US economy toward a more sustainable future.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesPress Releases | March 2019Download:Associated Program:Author(s):Mark PrimoffRegion(s):United States, Latin America, EuropeWorking Paper No. 924 | February 2019The paper builds on the concept of (shifting) involvements, originally proposed by Albert
Hirschman (2002 [1982]). However, unlike Hirschman, the concept is framed in class terms. A model is presented where income distribution is determined by the involvement of the two classes, capitalists and workers. Higher involvement by capitalists and lower involvement by workers tends to increase the profit share and vice versa. In turn, shifts in involvements are induced by the potential effect of a change in distribution on economic activity and past levels of distribution. On the other hand, as the profit share increases, the economy tends to become more wage led. The dynamics of the resulting model are interesting. The more the two classes prioritize the increase of their income share over economic activity, the more possible it is that the economy is unstable. Under the stable configuration, the most likely outcome is Polanyian predator-prey cycles, which can explain some interesting historical episodes during the 20th century. Finally, the paper discusses the possibility of conflict and cooperation within each of the distribution-led regimes.Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 907 | May 2018The paper discusses the Sraffian supermultiplier (SSM) approach to growth and distribution. It makes five points. First, in the short run the role of autonomous expenditure can be appreciated within a standard post-Keynesian framework (Kaleckian, Kaldorian, Robinsonian, etc.). Second, and related to the first, the SSM model is a model of the long run and has to be evaluated as such. Third, in the long run, one way that capacity adjusts to demand is through an endogenous adjustment of the rate of utilization. Fourth, the SSM model is a peculiar way to reach what Garegnani called the “Second Keynesian Position.” Although it respects the letter of the “Keynesian hypothesis,” it makes investment quasi-endogenous and subjects it to the growth of autonomous expenditure. Fifth, in the long run it is unlikely that “autonomous expenditure” is really autonomous. From a stock-flow consistent point of view, this implies unrealistic adjustments after periods of changes in stock-flow ratios. Moreover, if we were to take this kind of adjustment at face value, there would be no space for Minskyan financial cycles. This also creates serious problems for the empirical validation of the model.Download:Associated Program(s):The State of the US and World Economies Monetary Policy and Financial Structure Explorations in Theory and Empirical AnalysisAuthor(s):Related Topic(s):Region(s):United StatesPress Releases | May 2018Download:Associated Program:Region(s):United StatesConference Proceedings | April 2018A conference organized by the Levy Economics Institute of Bard College
The proceedings include the 2017 conference program, transcripts of keynote speakers’ remarks, synopses of the panel sessions, and biographies of the participants.Download:Associated Program(s):Author(s):Michael StephensRelated Topic(s):Region(s):United States, Latin America, EuropeStrategic Analysis | April 2018The US economy has been expanding continuously for almost nine years, making the current recovery the second longest in postwar history. However, the current recovery is also the slowest recovery of the postwar period.
This Strategic Analysis presents the medium-run prospects, challenges, and contradictions for the US economy using the Levy Institute’s stock-flow consistent macroeconometric model. By comparing a baseline projection for 2018–21 in which no budget or tax changes take place to three additional scenarios, the authors isolate the likely macroeconomic impacts of: (1) the recently passed tax bill; (2) a large-scale public infrastructure plan of the same “fiscal size” as the tax cuts; and (3) the spending increases entailed by the Bipartisan Budget Act and omnibus bill. Finally, Nikiforos and Zezza update their estimates of the likely outcome of a scenario in which there is a sharp drop in the stock market that induces another round of private-sector deleveraging.
Although in the near term the US economy could see an acceleration of its GDP growth rate due to the recently approved increase in federal spending and the new tax law, it is increasingly likely that the recovery will be derailed by a crisis that will originate in the financial sector.
Download:Associated Program:Author(s):Related Topic(s):Region(s):United StatesPress Releases | March 2018Download:Associated Program:Author(s):Mark PrimoffRegion(s):United States, Latin America, EuropePress Releases | February 2018Download:Associated Program(s):Author(s):Mark PrimoffRegion(s):United StatesResearch Project Reports | February 2018
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.
Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United StatesWorking Paper No. 894 | August 2017This paper undertakes an empirical inquiry concerning the determinants of long-term interest rates on US Treasury securities. It applies the bounds testing procedure to cointegration and error correction models within the autoregressive distributive lag (ARDL) framework, using monthly data and estimating a wide range of Keynesian models of long-term interest rates. While previous studies have mainly relied on quarterly data, the use of monthly data substantially expands the number of observations. This in turn enables the calibration of a wide range of models to test various hypotheses. The short-term interest rate is the key determinant of the long-term interest rate, while the rate of core inflation and the pace of economic activity also influence the long-term interest rate. A rise in the ratio of the federal fiscal balance (government net lending/borrowing as a share of nominal GDP) lowers yields on long-term US Treasury securities. The short- and long-run effects of short-term interest rates, the rate of inflation, the pace of economic activity, and the fiscal balance ratio on long-term interest rates on US Treasury securities are estimated. The findings reinforce Keynes’s prescient insights on the determinants of government bond yields.
Download:Associated Program(s):Author(s):Tanweer Akram Huiqing LiRelated Topic(s):Central banking Government bond yields John Maynard Keynes Long-term interest rates Monetary policy Short-term interest ratesRegion(s):United StatesWorking Paper No. 891 | May 2017A Survey
The stock-flow consistent (SFC) modeling approach, grounded in the pioneering work of Wynne Godley and James Tobin in the 1970s, has been adopted by a growing number of researchers in macroeconomics, especially after the publication of Godley and Lavoie (2007), which provided a general framework for the analysis of whole economic systems, and the recognition that macroeconomic models integrating real markets with flow-of-funds analysis had been particularly successful in predicting the Great Recession of 2007–9. We introduce the general features of the SFC approach for a closed economy, showing how the core model has been extended to address issues such as financialization and income distribution. We next discuss the implications of the approach for models of open economies and compare the methodologies adopted in developing SFC empirical models for whole countries. We review the contributions where the SFC approach is being adopted as the macroeconomic closure of microeconomic agent-based models, and how the SFC approach is at the core of new research in ecological macroeconomics. Finally, we discuss the appropriateness of the name “stock-flow consistent” for the class of models we survey.
Download:Associated Program(s):Author(s):Related Topic(s):Region(s):United StatesPress Releases | May 2017Download:Associated Program:Author(s):Mark PrimoffRegion(s):United StatesIn the Media | May 2017By Atossa Araxia Abrahamian
The Nation, May 22–28, 2017. All Rights Reserved.
In early 2013, Congress entered a death struggle—or a debt struggle, if you will—over the future of the US economy. A spate of old tax cuts and spending programs were due to expire almost simultaneously, and Congress couldn’t agree on a budget, nor on how much the government could borrow to keep its engines running. Cue the predictable partisan chaos: House Republicans were staunchly opposed to raising the debt ceiling without corresponding cuts to spending, and Democrats, while plenty weary of running up debt, too, wouldn’t sign on to the Republicans’ proposed austerity....
Read more: https://www.thenation.com/article/the-rock-star-appeal-of-modern-monetary-theory/Press Releases | May 2017Download:Associated Program(s):Author(s):Mark PrimoffRegion(s):United StatesIn the Media | April 2017By Deirdre Fernandes
The Boston Globe, April 19, 2017. All Rights Reserved.
The next recession will likely force the Federal Reserve to once again buy up large amounts of assets to boost the supply of money and stimulate the economy, a move that nearly a decade ago was considered drastic and unconventional, according to Boston Federal Reserve President Eric Rosengren....
Read more: https://www.bostonglobe.com/business/2017/04/19/remember-quantative-easing-could-make-comeback-says-boston-fed-president/FjNnoluxXb2WPXHJzjgQxO/story.htmlIn the Media | April 2017MarketWatch, April 19, 2017. All Rights Reserved.
The Federal Reserve should start shrinking its balance sheet relatively soon but do it so slowly that it doesn’t disturb the central bank’s plans to continue to gradually raise short-term interest rates, said Boston Fed President Eric Rosengren on Wednesday....
Read more: http://www.marketwatch.com/story/feds-rosengren-wants-to-shrink-balance-sheet-so-slowly-that-rate-hikes-can-continue-2017-04-19In the Media | April 2017Bu Gary Siegel
The Bond Buyer, April 19, 2017. All Rights Reserved.
The Federal Reserve's balance sheet will probably continue to be used as a monetary policy tool in the future, since interest rates remain low, Federal Reserve Bank of Boston President and CEO Eric S. Rosengren said Wednesday....
Read more: https://www.bondbuyer.com/news/rosengren-balance-sheet-will-be-policy-tool-going-forwardIn the Media | April 2017CNBC, April 19, 2017. All Rights Reserved.
The U.S. Federal Reserve should begin shedding its bond holdings soon but do so in a very gradual way that has little effect on its planned interest rate hikes, Boston Fed President Eric Rosengren said on Wednesday....
Read more: http://www.cnbc.com/2017/04/19/fed-should-shed-bonds-soon-keep-hiking-rates-rosengren.htmlIn the Media | April 2017By Jessica Dye
Financial Times, April 19, 2018. All Rights Reserved.
Eric Rosengren, president of the Boston Fed, has added his voice to the chorus of policymakers who say they are prepared to start the process of unwinding the central bank’s massive balance sheet....
Read more: https://www.ft.com/content/14e638f2-b0d8-347b-9eb5-5eff9d83d497In the Media | April 2017By Christopher Condon
Bloomberg, April 19, 2017. All Rights Reserved.
Federal Reserve Bank of Boston President Eric Rosengren said the central bank should shrink its out-sized balance sheet slowly enough that officials don’t need to alter the path of interest-rate increases....
Read more: https://www.bloomberg.com/news/articles/2017-04-19/fed-s-rosengren-calls-for-trimming-balance-sheet-soon-but-slowlyIn the Media | April 2017By Jonathan Spicer
Reuters, April 19, 2017. All Rights Reserved.
The U.S. Federal Reserve should begin shedding its bond holdings soon but do so in a very gradual way that has little effect on its planned interest rate hikes, Boston Fed President Eric Rosengren said on Wednesday....
Read more: http://www.reuters.com/article/us-usa-fed-rosengren-idUSKBN17L276In the Media | April 2017By Giovanni Bruno
The Street, April 19, 2017. All Rights Reserved.
Boston Fed President Eric Rosengren today said that he is prepared to begin the process of reducing the Federal Reserve's vast balance sheet, according to the Financial Times.
"In my view that process could begin relatively soon, and should not significantly alter the (Federal Open Market Committee's) continuing gradual normalization of short-term interest rates," Rosengren said today at the Hyman P Minsky Conference at Bard College....
Read more: https://www.thestreet.com/story/14093318/1/boston-fed-president-rosengren-balance-sheet-reduction-should-begin-soon.htmlIn the Media | April 2017By Wallace Witkowski
Fox Business, April 19, 2017. All Rights Reserved.
Economic news: Boston Federal Reserve President Eric Rosengren said at Bard College's Levy Economics Institute that he would like the Fed to start shrinking the balance sheet but at such a gradual rate (http://www.marketwatch.com/story/feds-rosengren-wants-to-shrink-balance-sheet-so-slowly-that-rate-hikes-can-continue-2017-04-19) that it doesn't disrupt the central bank's raising of interest rates.
Read more: http://www.foxbusiness.com/features/2017/04/19/market-snapshot-stocks-mostly-higher-but-dow-dragged-down-by-ibm.htmlIn the Media | April 2017Reuters, April 19, 2017. All Rights Reserved.
A top U.S. financial regulator on Wednesday warned against scrapping, as some American lawmakers urge, the "Title II" part of the 2010 Dodd-Frank legislation that created an alternative insolvency process for large firms, saying further reforms would be needed to protect the economy....
Read more: http://www.reuters.com/article/us-usa-banks-hoenig-idUSKBN17L1TOIn the Media | April 2017Bloomberg Markets, April 18, 2017. All Rights Reserved.
Federal Reserve Bank of Kansas City President Esther George discusses monetary policy and the state of the U.S. economy. She speaks with Bloomberg's Michael McKee on "Bloomberg Markets."
Video: https://www.bloomberg.com/news/videos/2017-04-18/fed-s-george-says-2017-rate-hikes-depend-on-economy-videoIn the Media | April 2017By Michael S. Derby
The Wall Street Journal, April 18, 2017. All Rights Reserved.
Federal Reserve Bank of Kansas City President Esther George said on Tuesday the U.S. central bank needs to press forward with rate rises, adding it should also begin reducing its massive balance sheet later in the year.
Read more: https://www.wsj.com/articles/feds-george-says-continuing-with-rate-rises-is-necessary-1492520723In the Media | April 2017CNBC, April 18, 2017. All Rights Reserved.
Another Federal Reserve policymaker on Tuesday backed an emerging U.S. central bank plan to begin trimming its bond holdings later this year, as Kansas City Fed President Esther George warned against waiting too long in order to "overheat" labor markets....
Read more: http://www.cnbc.com/2017/04/18/fed-official-backs-bond-pairing-this-year.htmlIn the Media | April 2017By Steve Matthews and Matthew Boesler
Bloomberg Markets, April 18, 2017. All Rights Reserved.
Federal Reserve Bank of Kansas City President Esther George urged the Federal Open Market Committee to start shrinking its $4.5 trillion balance sheet this year, making reductions automatic and not subject to a quick reversal....
Read more: https://www.bloomberg.com/news/articles/2017-04-18/george-calls-for-fed-s-balance-sheet-to-shrink-on-autopilotIn the Media | April 2017By Jonathan Spicer
Reuters, April 18, 2017. All Rights Reserved.
Another Federal Reserve policymaker on Tuesday backed an emerging U.S. central bank plan to begin trimming its bond holdings later this year, as Kansas City Fed President Esther George warned against waiting too long in order to "overheat" labor markets....
Read more: http://mobile.reuters.com/article/idUSKBN17K1J9In the Media | April 2017Nasdaq, April 18, 2017. All Rights Reserved.
Another Federal Reserve policymaker on Tuesday backed an emerging U.S. central bank plan to begin trimming its bond holdings later this year, as Kansas City Fed President Esther George warned against waiting too long in order to "overheat" labor markets....
Read more: http://m.nasdaq.com/article/another-fed-official-backs-paring-bond-holdings-this-year-20170418-00756Conference Proceedings | April 2017A conference organized by the Levy Economics Institute of Bard College with support from the Ford Foundation
The 2016 Minsky Conference addressed whether what appears to be a global economic slowdown will jeopardize the implementation and efficiency of Dodd-Frank regulatory reforms, the transition of monetary policy away from zero interest rates, and the “new” normal of fiscal policy, as well as the use of fiscal policies aimed at achieving sustainable growth and full employment. The proceedings include the conference program, transcripts of keynote speakers’ remarks, synopses of the panel sessions, and biographies of the participants.
Download:Associated Program(s):Author(s):Barbara Ross Michael StephensRegion(s):United StatesStrategic Analysis | April 2017From a macroeconomic point of view, 2016 was an ordinary year in the post–Great Recession period. As in prior years, the conventional forecasts predicted that this would be the year the economy would finally escape from the “new normal” of secular stagnation. But just as in every previous year, the forecasts were confounded by the actual result: lower-than-expected growth—just 1.6 percent.
The radical policy changes promoted by the new Trump administration dominated economic conditions in the closing quarter of the year and the first quarter of 2017. Markets have responded with exuberance since the November elections, on the expectation that the proposed policy measures would increase profitability by boosting growth and cutting personal and corporate taxes. However, an evaluation of the US economy’s structural characteristics reveals three key impediments to a robust, sustainable recovery: income inequality, fiscal conservatism, and weak net export demand. The new administration’s often conflicting policy proposals are unlikely to solve any of these fundamental problems—if anything, the situation will worsen.
Our latest Strategic Analysis provides two medium-term scenarios for the US economy. The “business as usual” baseline scenario (built on CBO estimates) shows household debt and GDP growth roughly maintaining their moribund postcrisis trends. The second scenario assumes a sharp correction in the stock market beginning in 2017Q3, combined with another round of private sector deleveraging. The results: negative growth and a government deficit of 8.3 percent by 2020—essentially a repeat of the crisis of 2007–9.Download:Associated Program:Author(s):Related Topic(s):Asset markets Economic recovery Fiscal conservatism Great Recession Income inequality Macroeconomic policy Secular stagnation Stock-flow consistent (SFC) modeling United States US trade balanceRegion(s):United StatesPress Releases | April 2017Download:Associated Program:Author(s):Mark PrimoffRegion(s):United StatesPolicy Note 2017/1 | April 2017Since the 1980s, economic recoveries in the United States have been delivering the vast majority of income growth to the wealthiest households. This policy note updates the analysis in One-Pager No. 47 and Policy Note 2015/4 with the latest data through 2015, looking at the distribution of average income growth (with and without capital gains) between the bottom 90 percent and top 10 percent of households, and between the bottom 99 percent and top 1 percent of households.
Little has changed when considering the distribution of average income growth in the current recovery (up to 2015) between the bottom 90 percent and top 10 percent of families, with or without capital gains. Although average real income for the bottom 90 percent of households is no longer shrinking, these families still capture a historically small proportion of that growth—only between 18 percent and 22 percent. The growing economy continues to deliver the most benefits to the wealthiest families.Download:Associated Program:Author(s):Related Topic(s):Business cycles Economic expansions Fiscal policy Full employment policy Income distribution Income inequality United StatesRegion(s):United StatesWorking Paper No. 887 | March 2017Job Creation in the Midst of Welfare State Sabotage
President Trump’s faux populism may deliver some immediate short-term benefits to the economy, masking the devastating long-term effects from his overall policy strategy. The latter can be termed “welfare state sabotage” and is a wholesale assault on essential public sector institutions and macroeconomic stabilization features that were built during the New Deal era and ushered in the “golden age” of the American economy. Starting in the late ’70s, many of these institutions were significantly eroded by Republicans and Democrats alike, paving the way for the rise of Trump but paling in comparison with what is to come.
Download:Associated Program:Author(s):Related Topic(s):Full employment Inequality Infrastructure Manufacturing Service sector Social wages Trickle-down economics Welfare stateRegion(s):United StatesWorking Paper No. 880 | January 2017Evidence from Measures of Economic Well-Being
The Great Recession had a tremendous impact on low-income Americans, in particular black and Latino Americans. The losses in terms of employment and earnings are matched only by the losses in terms of real wealth. In many ways, however, these losses are merely a continuation of trends that have been unfolding for more than two decades. We examine the changes in overall economic well-being and inequality as well as changes in racial economic inequality over the Great Recession, using the period from 1989 to 2007 for historical context. We find that while racial inequality increased from 1989 to 2010, during the Great Recession racial inequality in terms of the Levy Institute Measure of Economic Well-Being (LIMEW) decreased. We find that changes in base income, taxes, and income from nonhome wealth during the Great Recession produced declines in overall inequality, while only taxes reduced between-group racial inequality.
Download:Associated Program(s):The Distribution of Income and Wealth Gender Equality and the Economy The State of the US and World EconomiesAuthor(s):Related Topic(s):Distribution of income Distribution of wealth Great Recession Levy Institute Measure of Economic Well-being (LIMEW) Race United StatesRegion(s):United StatesWorking Paper No. 869 | June 2016Phases of Financialization within the 20th Century in the United States
This paper explores from a historical perspective the process of financialization over the course of the 20th century. We identify four phases of financialization: the first, from the 1900s to 1933 (early financialization); the second, from 1933 to 1940 (transitory phase); the third, between 1945 and 1973 (definancialization); and the fourth period begins in the early 1970s and leads to the Great Recession (complex financialization). Our findings indicate that the main features of the current phase of financialization were already in place in the first period. We closely examine institutions within these distinct financial regimes and focus on the relative size of the financial sector, the respective regulation regime of each period, and the intensity of the shareholder value orientation, as well as the level of financial innovations implemented. Although financialization is a recent term, the process is far from novel. We conclude that its effects can be studied better with reference to economic history.
Download:Associated Program(s):Author(s):Apostolos Fasianos Diego Guevara Christos PierrosRelated Topic(s):Region(s):United StatesIn the Media | May 2016By Gary D. Halbert
ValueWalk, May 3, 2016. All Rights Reserved.
Today we will focus on a recent study from the Levy Economics Institute which found that 90% of Americans were worse off financially in 2015 than at any time since the early 1970s. Furthermore, for the vast majority of Americans, the nation’s economy is in a prolonged period of stagnation, worse even than that of Japan.
So are we really worse off today than Japan? This latest study concludes that the answer isYES, when it comes to real income – that is, income adjusted for inflation. According to their findings, 90% of Americans earn roughly the same real income today as the average American earned back in the early 1970s. It’s an eye-opening look at how the vast majority of Americans are struggling to make ends meet....
Read more: http://www.valuewalk.com/2016/05/americans-worse-off/
In the Media | April 2016By Dora Mekouar
Voice of America, April 25, 2016. All Rights Reserved.
Donald Trump has famously declared that the American Dream is dead, but the majority of middle class Americans seem to disagree with the Republican presidential frontrunner.
Sixty-three percent of people surveyed earlier this year believe they are living the American Dream. That finding suggests American optimism hasn’t been a casualty of the recession, despite a report that says 90 percent of Americans are worse off today than they were in the 1970s....
Read more: http://blogs.voanews.com/all-about-america/2016/04/25/trump-says-american-dream-is-dead-is-he-right/In the Media | April 2016By Peter Eavis
The New York Times, April 14, 2016. All Rights Reserved.
Bank regulators on Wednesday sent a message that big banks are still too big and too complex. They rejected special plans, called living wills, that the banks have to submit to show they can go through an orderly bankruptcy.
The thinking behind the regulators’ call for living wills is that if a large bank crash is orderly, there will be no need to save it and no need for taxpayer bailouts....
Read more: http://www.nytimes.com/2016/04/15/upshot/how-regulators-mess-with-bankers-minds-and-why-thats-good.htmlAssociated Program(s):Region(s):United StatesIn the Media | April 2016Von Tom Fairless
Finanz Nachrichten, 14 April 2016. Alle Rechte vorbehalten.
Für das Instrument der negativen Zinsen gibt es nach Aussage des EZB-Vizepräsidenten Vitor Constancio "klare Grenzen". Die Schwelle, an der die Leute anfangen, Geld abzuziehen, um die Negativzinsen zu umgehen, scheine aber noch weit weg zu sein, sagte Constancio in einer Rede beim Bard College in New York....
Weiterlesen: http://www.finanznachrichten.de/nachrichten-2016-04/37060417-ezb-constancio-instrument-der-negativzinsen-hat-grenzen-015.htm
Associated Program(s):Region(s):United States, EuropeIn the Media | April 2016Foreign Affairs, April 14, 2016. All Rights Reserved.
Speech by Vítor Constâncio, Vice-President of the ECB, at the 25th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies at the Levy Economics Institute of Bard College, Blithewood, Annandale-on-Hudson, New York, 13 April 2016
Ladies and Gentlemen,
I want to start by thanking the Levy Institute for inviting me again to address this important conference honouring Hyman Minsky, the economist that the Great Recession justifiably brought into the limelight. His work provides crucial insights not only identifying the key mechanisms by which periods of financial calm sow the seeds for ensuing crises, but also the specific challenges that economies face in recovering from such crises....
Read more: http://foreignaffairs.co.nz/2016/04/14/speech-vitor-constancio-international-headwinds-and-the-effectiveness-of-monetary-policy/
Associated Program(s):Region(s):United States, EuropeIn the Media | April 2016By Alessandro Speciale and Matthew Boesler
The Washington Post, April 14, 2016. All Rights Reserved.
European Central Bank Vice President Vitor Constancio on Wednesday said there was only so much that negative interest rates can do to boost the economy and defended the central bank’s strategy as positive for the euro area as a whole.
It is “important to recall that there are clear limits to the use of negative deposit facility rates as a policy instrument,” he said in a speech at the Levy Economics Institute of Bard College in New York state. “Tier systems that simply pass direct costs at the margin can mitigate this concern but cannot dispel it altogether.” ...
Read more: http://washpost.bloomberg.com/Story?docId=1376-O5LE8T6TTDS101-597LUN1M75BN1J81FK32I14G7R
Associated Program(s):Region(s):United StatesIn the Media | April 2016By Richard Leong
Reuters, April 14, 2016. All Rights Reserved.
Negative deposit rates are not required as a monetary fix for the United States at the moment, in contrast with the euro zone, which is struggling with deflation risk, a top European Central Bank official said on Wednesday.
The U.S. economy, while far from robust, has been growing at a steady pace, and has seen some improvement in price growth since hitting a post-crisis low earlier this year.
Read more: http://uk.reuters.com/article/uk-ecb-policy-constancio-negativerates-idUKKCN0XA2Q4
Associated Program(s):Region(s):United StatesIn the Media | April 2016By Richard Leong
Yahoo! Finance, April 13, 2016. All Rights Reserved.
Negative deposit rates are not required as a monetary fix for the United States at the moment, in contrast with the euro zone, which is struggling with deflation risk, a top European Central Bank official said on Wednesday.
Read more: http://finance.yahoo.com/news/negative-rates-not-needed-u-225239865.html
Associated Program(s):Region(s):United StatesIn the Media | April 2016By Richard Leong
Reuters, April 13, 2016. All Rights Reserved.
Negative deposit rates are not required as a monetary fix for the United States at the moment, in contrast with the euro zone, which is struggling with deflation risk, a top European Central Bank official said on Wednesday.
The U.S. economy, while far from robust, has been growing at a steady pace, and has seen some improvement in price growth since hitting a post-crisis low earlier this year....
Read more: http://www.reuters.com/article/ecb-policy-constancio-negativerates-idUSL2N17G2GK
Associated Program(s):Region(s):United StatesIn the Media | April 2016By Alessandro Speciale and Matthew Boesler
Bloomberg, April 13, 2016. All Rights Reserved.
European Central Bank Vice President Vitor Constancio on Wednesday said there was only so much that negative interest rates can do to boost the economy and defended the central bank’s strategy as positive for the euro area as a whole.
It is “important to recall that there are clear limits to the use of negative deposit facility rates as a policy instrument,” he said in a speech at the Levy Economics Institute of Bard College in New York state. “Tier systems that simply pass direct costs at the margin can mitigate this concern but cannot dispel it altogether.” ...
Read more: http://www.bloomberg.com/news/articles/2016-04-13/ecb-s-constancio-says-negative-rate-policy-has-clear-limits
Associated Program(s):Region(s):United StatesIn the Media | April 2016By Richard Leong
The Fiscal Times, April 13, 2016. All Rights Reserved.
Negative deposit rates are not required as a monetary fix for the United States at the moment, in contrast with the euro zone, which is struggling with deflation risk, a top European Central Bank official said on Wednesday....
Read more: http://www.thefiscaltimes.com/latestnews/2016/04/13/Negative-rates-not-needed-US-now-ECBs-Constancio
Associated Program(s):Region(s):United StatesPress Releases | March 2016
Download:Associated Program:Author(s):Mark PrimoffRegion(s):United StatesPress Releases | March 2016
Download:Associated Program:Author(s):Mark PrimoffRegion(s):United StatesStrategic Analysis | March 2016Our latest strategic analysis reveals that the US economy remains fragile because of three persistent structural issues: weak demand for US exports, fiscal conservatism, and a four-decade trend in rising income inequality. It also faces risks from stagnation in the economies of the United States’ trading partners, appreciation of the dollar, and a contraction in asset prices. The authors provide a baseline and three alternative medium-term scenarios using the Levy Institute’s stock-flow consistent macro model: a dollar appreciation and reduced growth in US trading partners scenario; a stock market correction scenario; and a third scenario combining scenarios 1 and 2. The baseline scenario shows that future growth will depend on an increase in private sector indebtedness, while the remaining scenarios underscore the linkages between a fragile US recovery and instability in the global economy.Download:Associated Program:Author(s):Related Topic(s):Economic recovery Fiscal conservatism Income inequality Macroeconomic policy Stock-flow consistent (SFC) modeling United States US trade balanceRegion(s):United Statese-pamphlets | March 2016American Prosperity in Historical Perspective
Jordan Brennan, of Unifor and the Canadian Centre for Policy Alternatives, examines the rise of income inequality and the deceleration of economic growth in the United States in this two-part analysis. The first section explores the consolidation of corporate power, through mergers and acquisitions, between 1895 and 2013, and finds that reduced competition, declines in fixed asset investment, and the rise of practices such as stock buybacks have shifted investment away from the real economy, leading to weak economic growth and rising income inequality. The second section of Brennan’s analysis examines the interplay of labor unions, inflation, and income inequality. The author observes that the decline of unions as a countervailing force to corporate power and anti-inflationary monetary policy have shifted income away from middle- and lower-income groups. Similarly, he observes that over the past century inflation has tended to redistribute income from capital to labor—from the upper to the lower income strata. In this context, he observes that anti-inflation policy is a use of state power to effect a regressive redistribution of income.Download:Associated Program:Author(s):Jordan BrennanRegion(s):United StatesConference Proceedings | November 2015A conference organized by the Levy Economics Institute of Bard College with support from the Ford Foundation
The 2015 Minsky Conference addressed, among other issues, the design, flaws, and current status of the Dodd-Frank Wall Street Reform Act, including implementation of the operating procedures necessary to curtail systemic risk and prevent future crises; the insistence on fiscal austerity exemplified by the recent pronouncements of the new Congress; the sustainability of the US economic recovery; monetary policy revisions and central bank independence; the deflationary pressures associated with the ongoing eurozone debt crisis and their implications for the global economy; strategies for promoting an inclusive economy and a more equitable income distribution; and regulatory challenges for emerging market economies. The proceedings include the conference program, transcripts of keynote speakers’ remarks, synopses of the panel sessions, and biographies of the participants.
Download:Associated Program(s):Author(s):Barbara Ross Michael StephensRegion(s):United States, EuropeIn the Media | October 2015By Richie Bernardo
WalletHub, October 12, 2015. All Rights Reserved.
For many Americans today, the Great Recession is nothing more than the distant shadow of a troubled economic past. The longest downturn since the Great Depression officially ended six years ago. Cities coast to coast have completely bounced back — some even surpassing their pre-recession economic levels, thanks to lucrative industries that helped them rebuild or stay afloat through the crisis.
Yet the effects of the recession still reverberate in various parts of the U.S., falling deeper into debt and leaving millions of Americans wondering whether the recession has indeed blown over. ...
Read more: https://wallethub.com/edu/most-least-recession-recovered-cities/5219/#pavlina-r-tchernevaWorking Paper No. 844 | July 2015We present a model where the saving rate of the household sector, especially households at the bottom of the income distribution, becomes the endogenous variable that adjusts in order for full employment to be maintained over time. An increase in income inequality and the current account deficit and a consolidation of the government budget lead to a decrease in the saving rate of the household sector. Such a process is unsustainable because it leads to an increase in the household debt-to-income ratio, and maintaining it depends on some sort of asset bubble. This framework allows us to better understand the factors that led to the Great Recession and the dilemma of a repeat of this kind of unsustainable process or secular stagnation. Sustainable growth requires a decrease in income inequality, an improvement in the external position, and a relaxation of the fiscal stance of the government.
Download:Associated Program:Author(s):Related Topic(s):Region(s):United States, EuropeIn the Media | June 2015Economia, June 23, 2015. All Rights Reserved.
All'interno del quadro economico internazionale, Jan Kregel, direttore del programma “Politica Monetaria” presso il Levy Economic Institute negli USA, analizza qual è stato il ruolo degli Stati Uniti all'interno della crisi economica. Uno degli elementi che viene messo maggiormente in evidenza, è l' importanza data al settore finanziario, rispetto all'economia reale: ciò ha portando ad una minore attenzione a problemi come la disoccupazione, che rappresenta ancora una delle questioni irrisolte dell'Europa, ma soprattutto dell'Italia.
Una volta che la crisi economica è scoppiata negli Usa, si è diffusa a macchia d'olio specie nel continente europeo, dove la forbice presente tra europa meridionale e settentrionale, si è notevolmente ampliata. A tale ritratto, Kregel, aggiunge anche un'attenta le politiche economiche messe in atto da Cina e Giappone e dalle loro ripercussioni sul sistema economico mondiale.
intervista videoregistrata: http://www.economia.rai.it/articoli/la-crisi-negli-usa-il-punto-di-vista-di-jan-kregel/30575/default.aspxAssociated Program:Author(s):Jan KregelRegion(s):United States, AsiaIn the Media | June 2015Background Briefing, June 11, 2015. All Rights Reserved.
Levy President Dimitri B. Papadimitriou and Ian Masters discuss the Institute’s latest Strategic Analysis of the US economy, and how destructive political ideology is crippling recovery and undermining an otherwise healthy economy. Full audio of the interview is available here.
Associated Program:Author(s):Region(s):United StatesPress Releases | May 2015
Download:Associated Program:Author(s):Mark PrimoffRegion(s):United StatesStrategic Analysis | May 2015In this latest Strategic Analysis, the Institute’s Macro Modeling Team examines the current, anemic recovery of the US economy. The authors identify three structural obstacles—the weak performance of net exports, a prevailing fiscal conservatism, and high income inequality—that, in combination with continued household sector deleveraging, explain the recovery’s slow pace. Their baseline macro scenario shows that the Congressional Budget Office’s latest GDP growth projections require a rise in private sector spending in excess of income—the same unsustainable path that preceded both the 2001 recession and the Great Recession of 2007–9. To better understand the risks to the US economy, the authors also examine three alternative scenarios for the period 2015–18: a 1 percent reduction in the real GDP growth rate of US trading partners, a 25 percent appreciation of the dollar over the next four years, and the combined impact of both changes. All three scenarios show that further dollar appreciation and/or a growth slowdown in the trading partner economies will lead to an increase in the foreign deficit and a decrease in the projected growth rate, while heightening the need for private (and government) borrowing and adding to the economy’s fragility.Download:Associated Program:Author(s):Related Topic(s):Economic recovery Fiscal conservatism Household debt Income inequality Macroeconomic policy Stock-flow consistent (SFC) modeling Sustainable growth United States US trade balanceRegion(s):United StatesIn the Media | April 2015By Pedro Nicolaci da Costa
The Wall Street Journal, April 22, 2015. All Rights Reserved.
The effort by financial regulators to ensure big banks and other financial institutions have adequate levels of capital is misguided since that will only help lessen the impact of a crisis, not prevent one.
That’s the conclusion of Eric Tymoigne, an economist at Lewis & Clark College, in a presentation last week at the Levy Economics Institute‘s 24th Minsky Conference.
Read more: http://blogs.wsj.com/economics/2015/04/22/wall-street-watchdogs-should-prevent-crises-not-build-buffers/In the Media | April 2015Moyers & Company, April 18, 2015. All Rights Reserved.
Last Wednesday, Senator Elizabeth Warren delivered this speech at a conference at the Levy Institute in Washington which lays out the banking reform she believes still needs to happen. The Nation’s George Zornick called it “a blueprint for how Warren thinks Democrats should attack continued financial reform.”
Read more: http://billmoyers.com/2015/04/18/elizabeth-warren-speech/
In the Media | April 2015By Robert Feinberg
NewsMax, April 17, 2015. All Rights Reserved.
Perhaps the highlight of the 24th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies was a speech by Paul Tucker, senior fellow at both the Kennedy School and the Business School at Harvard, who served as deputy governor of the Bank of England (BOE) from 2009 to 2013....
Read more: http://www.newsmax.com/finance/robertfeinberg/tucker-financial-dodd-frank-bank/2015/04/17/id/639147/
In the Media | April 2015By Jim Tankersley
The Washington Post, April 17, 2015. All Rights Reserved.
It still isn’t winter in Westeros, at least not on television, although there is no shortage of reminders that it is coming. The seasons in George R.R. Martin’s “Game of Thrones” aren’t regular or celestial. Summer can last a few minutes or many years. At this point in the show, the start of the fifth season, it has gone on for a decade, the longest in the realm’s recorded history. The balmy weather is about to give way to snows and famine, and astoundingly, no one in the land seems prepared....
Read more: http://www.washingtonpost.com/blogs/wonkblog/wp/2015/04/17/game-of-thrones-and-the-economic-darkness-that-awaits-us/
In the Media | April 2015By David Dayen
The Fiscal Times, April 17, 2015. All Rights Reserved.
“Rules are not the enemy of markets,” Sen. Elizabeth Warren told me yesterday, on the heels of her major address on the unfinished business of financial reform at the Levy Institute’s Hyman Minsky Conference. “Rules promote innovation and competition. Rules prevent markets from blowing up. We learned that in 1929 and we should have learned it again in 2008.”
Read more: http://www.thefiscaltimes.com/Columns/2015/04/17/What-Elizabeth-Warren-Has-Hillary-Clinton-Needs
In the Media | April 2015By Martin Sandbu
Financial Times, April 17, 2015. All Rights Reserved.
Elizabeth Warren may not be running for president but she does not relent in gunning for Wall Street. On Wednesday she gave a speech arguing powerfully that the task of taming finance is far from finished. It is an important speech that deserves to be widely read. The location she chose to give it was, incidentally, as apt as can be. The Levy Institute has covered itself in more glory than the economics profession at large, with research less marred by the blind spots that once distracted so many economists from the looming crisis. (It was Hyman Minsky's home institution.)
Read more: http://www.ft.com/intl/cms/s/0/a37b9244-e386-11e4-9a82-00144feab7de.html#axzz3Xfu2l4dm
In the Media | April 2015By Robert Feinberg
NewsMax, April 16, 2015. All Rights Reserved.
On the first day of the Levy Institute's two-day annual Hyman P. Minsky Conference, held at the National Press Club in Washington, high-powered speakers held forth on the most prominent issues in the financial world that will affect the economy as Congress begins to try to legislate during the two years that the Republican Congress has to make its mark as the Obama administration winds down.
Read more: http://www.newsmax.com/finance/robertfeinberg/bullard-hoenig-warren-financial/2015/04/16/id/638861/
In the Media | April 2015By Portia Crowe
Business Insider Australia, April 16, 2015. All Rights Reserved.
Elizabeth Warren made a speech at the Levy Institute’s Minsky Conference on Wednesday and laid out some major financial reforms she wants to push through.
“The culture of cheating on Wall Street didn’t stop with the 2008 crash,” the populist Massachusetts Senator said.
Read more: http://www.businessinsider.com.au/elizabeth-warren-new-reforms-2015-4In the Media | April 2015MPA Magazine, April 16, 2015. All Rights Reserved.
U.S. Senator Elizabeth Warren has called on lawmakers to break up too-big-to-fail by capping the size of the largest financial institutions and separating commercial and investment banking. She also proposed limiting emergency lending by the Federal Reserve to troubled institutions by the Federal Reserve.
Speaking at the Levy Institute’s 24thannual Hyman Minsky conference, Warren said the fact that the Federal Reserve and the Federal Deposit Insurance Corp. say 11 banks threaten the entire U.S. economy means they are too big.
Read more: http://www.mpamag.com/mortgage-originator/warren-its-time-to-break-up-toobigtofail-banks-22121.aspx
In the Media | April 2015By George Zornick
The Nation, April 16, 2015. All Rights Reserved.
If Elizabeth Warren ran for president, a key part of her campaign—if not the centerpiece—would likely involve how to restructure the financial sector in a less dangerous and more productive way. Dodd-Frank was by many accounts a good start, but it’s clear the economy is still over-financialized and too-big-to-fail banks continue to pose an existential threat.
Warren isn’t running for president, but she unveiled that exact agenda in a sweeping speech Wednesday in a conference at the Levy Institute in Washington. It advocated an array of specific, often ambitious policy proposals, many of which have circulated in Washington for years and that Warren, at various times, has already called for.
Read more: http://www.thenation.com/blog/204433/big-elizabeth-warren-speech-how-finish-financial-reform#In the Media | April 2015By Jan Strupczewski
Reuters, April 16, 2015. All Rights Reserved.
The European Central Bank's monetary policy will be accommodative in the foreseeable future, the bank's Vice President Vitor Constancio said on Thursday.
"... Monetary policy needs to be accommodative, as I expect to be the case for the foreseeable future in the euro area," Constancio told a seminar at the Levy Economics Institute.
In the Media | April 2015By Harriet Torry
The Wall Street Journal, April 16, 2015. All Rights Reserved.
Vitor Constancio, vice president of the European Central Bank, said Thursday that economic recovery in Europe remains “gradual and moderate,” underscoring the need for loose monetary policy in the eurozone for the foreseeable future.
“Monetary policy has to remain accommodative with low interest rates,” Mr. Constancio said, adding that “getting Europe growing again is one of the most important challenges we face at present.”
But Mr. Constancio also highlighted the importance of being aware of the limitations of monetary policy, in remarks at a conference hosted by the Levy Institute.
Read more: http://blogs.wsj.com/economics/2015/04/16/ecb-constancio-eurozone-monetary-policy-needs-to-stay-accommodative/In the Media | April 2015By Charles Pierce
Esquire, April 16, 2015. All Rights Reserved.
It's been an interesting week for Senator Professor Elizabeth Warren. First, in Time Magazine's annual 100 Groovy Folks list, she gets a rapturous shout-out from none other than Hillary Rodham Clinton, currently touring the silos of Iowa and the clam shacks of New Hampshire....
Read more: http://www.esquire.com/news-politics/politics/news/a34418/a-visit-from-senator-professor-warren/
In the Media | April 2015By Victoria Finkle
American Banker, April 15, 2015. All Rights Reserved.
WASHINGTON — Sen. Elizabeth Warren, D-Mass., delivered a sweeping speech Wednesday aimed at what she's calling "the unfinished business of financial reform."
Warren laid out a number of broad policy goals for the banking industry, arguing that while the Dodd-Frank Act "made some real progress," more needs to be done to resurrect a safe financial system.
Read more: http://www.americanbanker.com/news/law-regulation/warren-lays-out-detailed-plan-to-take-on-wall-street-1073764-1.htmlIn the Media | April 2015By Matthew Yglesias
Vox, April 15, 2015. All Rights Reserved.
Elizabeth Warren isn't running for president. But she does have an agenda for reining in the big banks that would go well beyond the Obama administration's (underrated) bank regulation moves and substantially alter the role of Wall Street in American life.
In a speech delivered on April 15 at the Levy Institute's 24th annual Hyman Minsky conference, Warren laid out the most comprehensive and ambitious version of her agenda yet.
Read more: http://www.vox.com/2015/4/15/8420789/elizabeth-warren-prosecutionsIn the Media | April 2015By Holly LeFon
US News & World Report, April 15, 2015. All Rights Reserved.
Sen. Elizabeth Warren, D-Mass., called Wednesday for breaking up big banks through structural reforms that would bring a decisive end to “too big to fail.”
Warren told a Levy Economics Institute conference she has worked with other lawmakers to advance a bill that would build a wall between commercial banking and investment banking.
Read more: http://www.usnews.com/news/articles/2015/04/15/warren-calls-for-breaking-up-the-banksIn the Media | April 2015By Barney Jopson and Gina Chon
Financial Times, April 15, 2015. All Rights Reserved.
Elizabeth Warren, the anti-Wall Street senator, has lashed out at US regulators for being soft on misbehaving banks, describing settlements that extracted billion dollar fines as a “slap on the wrist” and demanding that banks be put on trial.
The remarks by Ms Warren, who has emerged as a standard bearer of the Democratic left, are designed to put pressure on the US authorities as they come close to concluding their investigation into the manipulation of the foreign exchange market.
Read more: http://www.ft.com/cms/s/0/bce88134-e394-11e4-9a82-00144feab7de.html?siteedition=intl#axzz3XQnJg6ZU