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  Working Paper No. 555

  Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia

  This paper explores the significance of Islamic banking in Malaysia for stability in the country’s economy as a whole. Neither conventional theory nor Islamic economics puts forward a systematic explanation of financial intermediation; consequently, neither is capable of identifying destabilizing elements in the system. Instead, a flow-of-funds approach similar to Minsky’s own is applied to […]
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  Report No. 1

  Report January 2009

  This issue of the Report opens with Senior Scholar L. Randall Wray’s new Public Policy Brief on money market capitalism (financialization), which has resulted in a series of boom-and-bust cycles in equities, real estate, and, most recently, commodities. Wray maintains that policymakers must fundamentally change the structure of our economic system in order to break […]
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  Working Paper No. 554

  Macroeconomic Imbalances in the United States and Their Impact on the International Financial System

  The argument put forward in this paper is twofold. First, the financial crisis of 2007–08 was made global by the current account deficit in the United States; and second, there is global dependence on the United States trade deficit as a means of maintaining liquidity in financial markets. The outflow of dollars from the United […]
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  Policy Notes No. 1

  Obama’s Job Creation Promise

  Job creation is once again at the forefront of policy action, and for advocates of pro-employment policies, President Obama’s Keynesian bent is a most welcome change. However, there are concerns that Obama’s plan simply does not go far enough, and that a large-scale public investment program may face shortages of skilled labor, put upward pressure […]
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  Public Policy Brief Highlight No. 97

  After the Bust

  “Change” was the buzzword of the Obama campaign, in response to a political agenda precipitated by financial turmoil and a global economic crisis. According to Research Associate Thomas Palley, the neoliberal economic policy paradigm underlying that agenda must itself change if there is to be a successful policy response to the crisis. Mainstream economic theory […]
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  Strategic Analysis

  Flow of Funds Figures Show the Largest Drop in Household Borrowing in the Last 40 Years

  The Federal Reserve’s latest flow-of-funds data reveal that household borrowing has fallen sharply lower, bringing about a reversal of the upward trend in household debt. According to the Levy Institute’s macro model, a fall in borrowing has an immediate effect—accounting in this case for most of the 3 percent drop in private expenditure that occurred […]
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  Strategic Analysis

  Prospects for the United States and the World: A Crisis That Conventional Remedies Cannot Resolve

  The economic recovery plans currently under consideration by the United States and many other countries seem to be concentrated on the possibility of using expansionary fiscal and monetary policies alone. In a new Strategic Analysis, the Levy Institute’s Macro-Modeling Team argues that, however well coordinated, this approach will not be sufficient; what’s required, they say, […]
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  Working Paper No. 553

  Insuring Against Private Capital Flows

  Following an analysis of the forces behind the “global capital flows paradox” observed in the era of advancing financial globalization, this paper sets out to investigate the opportunity costs of self-insurance through precautionary reserve holdings. We reject the idea of reserves as low-cost protection against the vagaries of global finance. We also deny that arrangements […]
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  Summary No. 1

  Summary Winter 2009

  Recent attempts by the Treasury and the Federal Reserve to counter the worst financial and economic crisis since the Great Depression have brought into question the role of the government and the effectiveness of its rescue package. Levy Institute scholars foresee an extended period of stagnation and possibly deflation if the government does not take […]
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  Working Paper No. 552

  Hypothetical Integration in a Social Accounting Matrix and Fixed-price Multiplier Analysis

  This study proposes a simple modification to a Social Accounting Matrix (SAM) in order to analyze the multiplier effects of a new sector. A different input composition, or technology, of the sector makes a conventional analysis of final-demand injections on existing sectors invalid. Author Kijong Kim shows that the modification—so-called hypothetical integration—is an efficient way […]
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  Working Paper No. 551

  Small Is Beautiful

  This paper examines the relationship between farm size and yield per acre in Turkey using heretofore untapped data from a 2002 farm-level survey of 5,003 rural households. After controlling for village, household, and agroclimatic heterogeneity, a strong inverse relationship between farm size and yield is found to be prevalent in all regions of Turkey. The […]
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  Working Paper No. 550

  An Empirical Analysis of Gender Bias in Education Spending in Paraguay

  Gender affects household spending in two areas that have been widely studied in the literature. One strand documents that greater female bargaining power within households results in a variety of shifts in household production and consumption. An important source of intrahousehold bargaining power is ownership of assets, especially land. Another strand examines gender bias in […]