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Full-Text Articles in Social and Behavioral Sciences
A Note On Krugman's Liquidity Trap, Stefano Di Bucchianico
A Note On Krugman's Liquidity Trap, Stefano Di Bucchianico
Economics Department Working Paper Series
The 1998 stylized model of Krugman constituted a ground-breaking contribution explaining the long lasting Japanese stagnation as the consequence of a ‘liquidity trap’ situation featuring a negative natural interest rate. Our critique to such a proposal will focus on three aspects. First, we will question the logical structure of the model, providing an alternative interpretation of its closure. Second, we will argue that aggregate demand has no role in the explanation, as the cause for the persistent excess of savings over desired investment is the result of a supply side shock plus a financial rigidity on the nominal interest rate. …
Aggregate Demand, Functional Finance And Secular Stagnation, Peter Skott
Aggregate Demand, Functional Finance And Secular Stagnation, Peter Skott
Economics Department Working Paper Series
This paper makes three main points. Fiscal policy, first, may be needed in the long run to maintain full employment and avoid secular stagnation. If fiscal policy is used in this way, second, the long-run debt ratio depends (i) inversely on the rate of growth, (ii) inversely on government consumption, and (iii) directly on the degree of inequality. The analysis, third, suggests that policies and policy debates have been misguided. The recent rediscovery of ’secular stagnation’ by Summers and others should be welcomed, but the suggested theoretical redirection is unclear and does not go far enough.
Public Debt, Secular Stagnation, And Functional Finance, Peter Skott
Public Debt, Secular Stagnation, And Functional Finance, Peter Skott
Economics Department Working Paper Series
Fiscal policy and public debt may be required to maintain full employment and avoid secular stagnation. This conclusion emerges from a range of different models, including OLG specifications and stock-flow consistent (post-) Keynesian models. One of the determinants of the required long-run debt ratio is the rate of economic growth. Low growth leads to high debt, and empirical correlations between growth and debt may reflect this causal effect of growth on debt, rather than negative effects of debt on growth. A second result relates directly to austerity policies. The level of government consumption and the structure of taxation influence the …
Japanese Growth And Stagnation: A Keynesian Perspective, Takeshi Nakatani, Peter Skott
Japanese Growth And Stagnation: A Keynesian Perspective, Takeshi Nakatani, Peter Skott
Economics Department Working Paper Series
This paper uses a modified Harrodian model to understand both the long period of rapid Japanese growth and the recent period of stagnation. The model has multiple steady-growth solutions when the labour supply is highly elastic, and government intervention, we argue, took the Japanese economy onto a high-growth trajectory. Labour constraints began to appear around 1970, and a combination of high saving rates and slow population growth account for the stagnation of the 1990s. This combination produces a structural liquidity trap and threatens the sustainability of attempts to ensure near full employment through …fiscal policy or by running a persistent …