Sébastien Charles

A Post-Keynesian Model of Accumulation with a Minskyan Financial Structure

Abstract Minskys theory of financial instability is a strong alternative to neoclassical theory. Many Post-Keynesian authors use this analysis in order to elaborate models that give rise to crises or business cycles. Nevertheless, none of them has directly linked growth and financial structure. This article proposes a simple macroeconomic model linking the accumulation of capital and the state of the financial structure as defined by Minsky. The analysis shows how a capitalist economy may become financially fragile, and it suggests that instability is apt to be the rule.

Employment Flexibility, Dual Labour Markets, Growth, and Distribution

Many policymakers and economists have argued in favour of greater labour market flexibility as a part of structural adjustment reforms that are expected to improve economic performance. Existing post-Keynesian-Kaleckian (PKK) models are unable to address these issues because they assume away long-term labour by allowing employment to be short term and adjusting freely with output. This paper introduces long-term labour into PKK models. We develop a model that provides alternative ways of modelling labour market flexibility and suggest that when aggregate demand issues are important, an increase in employment flexibility is likely to have adverse growth and distributional impacts.

An additional explanation for the variable Keynesian multiplier: The role of the propensity to import

ABSTRACT This article analyzes the concept of the Keynesian multiplier from a new perspective. Several recent studies have shown that the fiscal multiplier is endogenous to the level of economic activity, increasing during recessions and decreasing during the boom. Here, we provide some evidence, explaining this variability over the business cycle, based on the overreaction of aggregate imports. Then, we apply the concept of endogenous propensity to import, varying with capacity utilization, to a neo-Kaleckian model of growth and distribution. We perform some simple simulations showing that the Keynesian multiplier increases during a recession, which logically does not advocate a reduction in public spending when the economy is in crisis.

Hyperinflation in a small open economy with a fixed exchange rate: A post Keynesian view

ABSTRACT This paper examines the emergence of hyperinflation in a small open economy with a fixed exchange rate from a post Keynesian perspective. Three variables play key roles: distributive conflict, external debt, and expectations about the exchange rate. First, we propose a short-run Kaleckian macro model. Then, we study the long-run behavior of the model by endogenizing the price level and foreign indebtedness. We conclude that the existence of expectations about the nominal exchange rate is crucial to explaining the emergence of hyperinflation.

Why Are Keynesian Multipliers Larger in Hard Times? A Palley-Aftalion-Pasinetti Explanation

We use the Annual Macroeconomic database of the European Commission (AMECO) to confirm that textbook multipliers are nearly always greater than one and that they increase during recessions. Propensity to import falls in recessions through the combined effects of the amplified fall in investment and the high import content of investment. A change in saving behavior may also raise the multiplier. These findings strongly support the need for countercyclical fiscal policies during recessions.

Bulgaria’s hyperinflation in 1997: transition, banking fragility and foreign exchange

Abstract This article has two objectives: to study the 1997 episode of hyperinflation in Bulgaria, and to compare and contrast this analysis with the post-Keynesian theoretical approach. This approach highlights the role of three components observed simultaneously in order to understand the emergence of hyperinflation: a virulent distributive conflict; the presence of indexing mechanisms; and finally, flight from domestic currency into one or more foreign currencies. The article reveals that a transitional economy like that of Bulgaria in the 1990s may generate hyperinflation in the absence of any violent distribution conflict: the transition and the banking crisis engender inflation. The foreign exchange rate is decisive in the emergence of hyperinflationary dynamics (and therefore mistrust of domestic currency). This interpretation of hyperinflation is confirmed by an econometric analysis.

Post‐socialist transformation and growth regime: some comments about the Chinese case

Purpose - This paper attempts to show that Chinese post-socialist transformation has involved a deep change in growth regime. Design/methodology/approach - The authors begin by detailing the institutional background of the study: the Chinese post-socialist transformation. They compare growth regimes both in Maoist and post Maoist eras. Therefore, by using official data, the paper deals with the difficulties and challenges of the current growth regime. Findings - The new growth regime could be particularly difficult to manage regarding Chinas dependence on external demand in a context of low domestic demand. In particular, the main difficulty to which this growth regime could be confronted with concerns the occurrence of an external contraction in the US. The authors then try to assess why such an event may appear by providing a list of external risks to emphasize the economic vulnerability of China. Practical implications - This paper is essentially intended for Chinese policy-makers who wish to adopt a more balanced growth strategy in the long-run. Originality/value - The paper develops an alternative view on the macroeconomic situation of China. In particular, it insists on its vulnerability through external demand.