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  Public Policy Brief Highlight No. 84

  Can Basel II Enhance Financial Stability?

  Even as the United States enjoys an economic expansion, there is an undercurrent of concern among economic analysts who follow financial markets. Some feel that the expansion of the credit derivatives markets poses the threat of a crisis similar to the Long-Term Capital Management debacle of 1998. Credit derivatives allow banks to share risks with […]
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  Policy Notes No. 4

  Debt and Lending

  Many papers published by the Levy Institute during the last few years have emphasized that the American economy has relied too much on the growth of lending to the private sector, most particularly to the personal sector, to offset the negative effect on aggregate demand of the growing current account deficit. Moreover, this growth in […]
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  Audio

  Government Spending on the Elderly

  The aging of the American population will be a primary domestic public policy issue during the next decades. According to Census Bureau projections, the proportion of the elderly in the total population will increase from its 2002 level of under 13 percent to slightly more than 16 percent by 2020. Concomitantly, the proportion of working-age […]
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  Policy Notes No. 3

  Twin Deficits and Sustainability

  In the mid-to-late 1980s, the American economy simultaneously produced—for the first time in the postwar period—huge federal budget deficits as well as large current account deficits, together known as the “twin deficits”. This generated much debate and hand-wringing, most of which focused on supposed “crowding-out” effects. Many claimed that the budgetdeficit was soaking up private […]
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  Working Paper No. 445

  A Random Walk Down Maple Lane?

  The development of the permanent income/life cycle consumption hypothesis was a key blow to Keynesian and Kaleckian economics. According to George Akerlof, it "set the agenda" for modern neoclassical macroeconomics. This paper focuses on the relationship of housing wealth to neoclassical consumption theory, and in particular, the degree to which homes can be treated collectively […]
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  Report No. 2

  Report April 2006

  The latest Levy Institute Strategic Analysis depicts a household sector that is struggling under an unprecedented burden of debt and relying upon an unsustainable upward trend in real estate prices. The authors find that a reversal of this trend could severely dampen economic growth. Contents: NEW STRATEGIC ANALYSIS Are Housing Prices, Household Debt, and Growth […]
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  Press Release

  Government Spending On the Elderly to Be Topic of Levy Institute Conference with Leading Economists, Social Scientists, and Other Analysts

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  Working Paper No. 444

  Tinbergen Rules the Taylor Rule

  This paper elaborates a simple model of growth with a Taylor-like monetary policy rule that includes inflation targeting as a special case. When the inflation process originates in the product market, inflation targeting locks in the unemployment rate prevailing at the time the policy matures. Even though there is an apparent NAIRU and Phillips curve, […]
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  Policy Notes No. 2

  The Fiscal Facts

  Today’s federal budget deficits are a preoccupation of many American citizens and more than a few political leaders. Is the American government going bankrupt? Does our fiscal condition warrant radical surgery, as some now prescribe? Or, are we in such deep trouble that there is no plausible route of escape?
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  Working Paper No. 443

  Personality and Earnings

  This paper studies personality as a potential explanation for wage differentials between apparently similar workers. This follows initial studies by Jencks (1979) that suggest that certain personality traits, such as industriousness and leadership, have an impact on earnings. The paper aims to provide a theoretical framework within which these effects may be analyzed.The study begins […]
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  Working Paper No. 442

  Government Effects on the Distribution of Income

  This paper is the overview chapter of an edited volume on “The Distributional Effects of Government Spending and Taxation.” The paper offers the author’s perspective on the government’s role as a redistributive agent. Taxation and public spending programs are analyzed using the experiences of the United States and other OECD countries. The stark differences among […]
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  Working Paper No. 441

  Prolegomena to Realistic Monetary Macroeconomics

  This paper sets out a rigorous basis for the integration of Keynes-Kaleckian macroeconomics (with constant or increasing returns to labor, multipliers, markup pricing, et cetera) with a model of the financial system (comprising banks, loans, credit money, equities, and so on), together with a model of inflation. Central contentions of the paper are that there […]