Aggregate demand, functional finance, and secular stagnation

Skøtt, Peter

doi:10.4337/ejeep.2016.02.03

Cited by 8 publications

(11 citation statements)

References 36 publications

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“… These steady‐growth results can be obtained in other settings; e.g. Schlicht (), Godley and Lavoie (2008), Ryoo and Skott (), Skott and Ryoo () and Skott ().…”

supporting

confidence: 69%

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Fiscal and Monetary Policy Rules in an Unstable Economy

Ryoo

Skøtt

2016

Metroeconomica

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This paper examines the implications of different monetary and fiscal policy rules in an economy characterized by Harrodian instability. We show that (i) a monetary rule along Taylor lines can be stabilizing for low debt ratios but becomes de-stabilizing if the debt ratio exceeds a certain threshold, (ii) a 'Keynesian' fiscal policy rule can stabilize the economy at full employment, (iii) a fiscal 'austerity' rule that links fiscal parameters to deviations from a target debt ratio fails to adjust the 'warranted' to the 'natural' growth rate and destabilizes the warranted path, (iv) instability may arise from a combination of fiscal and monetary policy rules which separately would stabilize the system, and (v) austerity rules can in some circumstances enhance the stabilizing effects of monetary policy.JEL classification: E12, E52, E62, E63

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“… These steady‐growth results can be obtained in other settings; e.g. Schlicht (), Godley and Lavoie (2008), Ryoo and Skott (), Skott and Ryoo () and Skott ().…”

supporting

confidence: 69%

“… Skott (2015b, 2016) and Skott and Ryoo () discuss functional finance in relation to ‘secular stagnation’.…”

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confidence: 99%

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Fiscal and Monetary Policy Rules in an Unstable Economy

Ryoo

Skøtt

2016

Metroeconomica

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“…Lavoie (2016) concedes that 'in the long run there is no truly exogenous variable ' (p. 194) and suggests that 'neo-Kaleckian authors never had a long-run steady state in mind' (p. 175). Pariboni (2016, p. 222) is more specific, arguing that autonomous demand and the supermultiplier may 'help explaining specific periods, episodes or modes of 9 Skott (2013, 2017) analyze functional finance in a stock-flow consistent corporate economy; see Skott (2016) for a broader discussion of fiscal policy and public debt in relation to 'secular stagnation'. accumulation (and the seeds of forthcoming crises) within them as, for instance, the consumer debt-led growth of the "Great Moderation" era that preceded the "Great Recession"'.…”

Section: E D I U M -R U N I N T E R P R E T a T I O N Smentioning

confidence: 99%

“… Ryoo and Skott (, ) analyze functional finance in a stock‐flow consistent corporate economy; see Skott () for a broader discussion of fiscal policy and public debt in relation to ‘secular stagnation’.…”

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confidence: 99%

Autonomous demand, Harrodian instability and the supply side

Skøtt

2017

Metroeconomica

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A recent literature introduces autonomous demand as the driver of long-run economic growth and as a stabilizing force that tames Harrodian instability. The argument is unconvincing. The stabilizing e §ect is modest for plausible parameter values and, more importantly, it is questionable whether any components of aggregate demand can be viewed as autonomous in the long run. By contrast, models that include the supply side (the labor market) and/or economic policy can address Harrodian instability and produce level and growth e §ects that resemble those derived in the literature on autonomous demand. JEL numbers: E11, E12, O41

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Government expenditure ceiling and public debt dynamics in a demand-led macromodel

Ribeiro¹,

Lima²

2018

Journal of Post Keynesian Economics

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This article explores some aspects of the debate about the efficacy of a fiscal rule that sets a government expenditure ceiling for the stabilisation of the public debt-to-output ratio. We develop a demand-led macromodel that assumes a closed economy operating with excess capacity and show that a fiscal rule that sets a limit for government spending, excluding the payment of interests, may not ensure a non-explosive trajectory of the public debt-to-output ratio. Our model allows us to map out different outcomes in terms of the stabilisation of the public debt stemming from the process of fiscal consolidation and conclude that the commitment of the fiscal authority to comply with the ceiling by cutting government spending is less likely to stabilise the public debt-to-output ratio in economies enduring excessively high interest rates accompanied by more regressive taxation systems. Our model also suggests that a more progressive tax structure may increase the likelihood of public debt stabilisation in the long run.

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Aggregate demand, functional finance, and secular stagnation

Cited by 8 publications

References 36 publications

Fiscal and Monetary Policy Rules in an Unstable Economy

Fiscal and Monetary Policy Rules in an Unstable Economy

Autonomous demand, Harrodian instability and the supply side

Government expenditure ceiling and public debt dynamics in a demand-led macromodel

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