Archive for the ‘Levy Institute’ Category

Levy MS Program Now Accepting Applications for Fall 2016

Michael Stephens | September 10, 2015


The Levy Economics Institute Master of Science in Economic Theory and Policy is a two-year degree program that emphasizes theoretical and empirical aspects of economic policy analysis through specialization in one of five key research areas: macroeconomic theory, policy, and modeling; monetary policy and financial structure; distribution of income, wealth, and well-being; gender equality and time poverty; and employment and labor markets. Headed by Levy Institute Research Director Jan Kregel, the MS program draws on the expertise of Institute scholars as well as selected Bard faculty.

Application deadlines for Fall 2016 are November 15 for Early Decision and January 15 for Regular Decision. Scholarships are available. For more information, visit the Levy MS website; to apply, go to

The Levy Institute welcomes two new senior scholars, both of whom have also joined the faculty of the Levy MS program:
Fernando J. Cardim de Carvalho
Senior Scholar Fernando J. Cardim de Carvalho is emeritus professor of economics at the Federal University of Rio de Janeiro. He has worked as a consultant to the Central Bank of Brazil and the Brazilian National Bank for Economic and Social Development, among other institutions, and is the author, most recently, of Liquidity Preference and Monetary Economies.
John F. Henry
Senior Scholar John F. Henry is professor emeritus, California State University, Sacramento, where he taught economics from 1970 to 2004. He also lectures at the University of Missouri–Kansas City. Henry’s research interests include the history of economic thought, economic history, and political economy, and he has published widely in the academic press.
Fernando Rios-Avila
Research Scholar Fernando Rios-Avila, who joined the Institute in 2013, is also new to the MS faculty this year. His research spans labor economics and applied microeconomics as well as development economics, poverty, and inequality.


Working Paper Roundup 8/31/2015

Michael Stephens | August 31, 2015

A Nonbehavioral Theory of Saving
Michalis Nikiforos

“We present a model where the saving rate of the household sector, especially households at the bottom of the income distribution, becomes the endogenous variable that adjusts in order for full employment to be maintained over time. An increase in income inequality and the current account deficit and a consolidation of the government budget lead to a decrease in the saving rate of the household sector. Such a process is unsustainable because it leads to an increase in the household debt-to-income ratio, and maintaining it depends on some sort of asset bubble. This framework allows us to better understand the factors that led to the Great Recession and the dilemma of a repeat of this kind of unsustainable process or secular stagnation. Sustainable growth requires a decrease in income inequality, an improvement in the external position, and a relaxation of the fiscal stance of the government.”

Is a Very High Public Debt a Problem?
Pedro Leão

“we propose a policy architecture that differs from [Abba] Lerner’s in two aspects: it envisions a different way of preventing a very high public debt from ending in default, and it eliminates the burden associated with levying taxes to meet the interest payments on the debt (in one word, it eliminates the debt burden altogether). Our architecture requires flexible exchange rates. It involves (i) having the central bank impose near-zero nominal government bond yields for as long as necessary—a stance that should be accompanied by (ii) a replacement of monetary by fiscal policy as the instrument to control inflation.

A second objective of this paper is to show that government deficits associated with a full-employment fiscal policy do not face a financing problem. After these deficits are initially financed through the net creation of base money, the private sector’s savings always come in the form of government bond purchases or, if a default is feared, of ‘acquisitions’ of new money.”

Making the Euro Viable: The Euro Treasury Plan
Jörg Bibow

“The idea is to create a Euro Treasury as a vehicle to pool future eurozone public investment spending and have it funded by proper eurozone treasury securities. Member state governments would agree on the initial volume of common area-wide public investment spending and on the annual growth rate of public investment thereafter. Beyond that, the Euro Treasury operates on auto-pilot. … This is not simply another ‘euro bonds’ proposal, though. In particular, there is no debt mutualization of existing national debts involved here. Member states alone would remain responsible for their respective national public debt. …

As to the evolution of national public debts under the Euro Treasury plan, steady deficit spending on public investment funded at the center that is the basis of Europe’s common future will finally allow and enable national treasuries to (nearly) balance their structural current budgets. Within one generation, there will be little national public debt left to worry about. … In general, member states will experience a decline in their overall interest burden as cheaper debts replace more expensive debts over time. While mimicking the original Maastricht criteria of fiscal rectitude and stability at the union level, the overall outcome would also resemble the situation in another—functioning—currency union during normal times: the United States.”

Marx’s Theory of Money and 21st-century Macrodynamics
Tai Young-Taft

“Marx’s theory of money is critiqued relative to the advent of fiat and electronic currencies and the development of financial markets. Specific topics of concern include (1) today’s identity of the money commodity, (2) possible heterogeneity of the money commodity, (3) the categories of land and rent as they pertain to the financial economy, (4) valuation of derivative securities, and (5) strategies for modeling, predicting, and controlling production and exchange of the money commodity and their interface with the real economy.”

The Effects of a Euro Exit on Growth, Employment, and Wages
Riccardo Realfonzo and Angelantonio Viscione

“A technical analysis shows that the doomsayers who support the euro at all costs and those who naively theorize that a single currency is the root of all evil are both wrong. A euro exit could be a way of getting back to growth, but at the same time it would entail serious risks, especially for wage earners. The most important lesson we can learn from the experience of the past is that the outcome, in terms of growth, distribution, and employment, depends on how a country remains in the euro; or, in the case of a euro exit, on the quality of the economic policies that are put in place once the country regains control of monetary and fiscal matters, rather than on abandoning the old exchange system as such. …

Although the exit from a monetary union such the eurozone would be unprecedented, some important pointers can be found in the currency crises of the past that more closely resemble the present case. For this purpose, we will examine the currency crises that in recent history have entailed large devaluations of the exchange rate and that were accompanied by the abandoning of previous agreements or exchange systems. This allows us to take into account both the phenomenon of devaluation and the political-institutional changes that follow when exchanges regimes are abandoned.”


Crystal Balls, or Robust Economic Research?

Gennaro Zezza | July 16, 2015

An article from Bloomberg listed nine people who saw the Greek crisis coming years ago. The list may be narrowly confined to Anglo-Saxon economists, but I am quite happy that most of the people listed worked at, or were/are affiliated with, the Levy Institute.

Wynne Godley

Wynne Godley is the first on the list, given his prescient words in the London Review of Books in October 1992. I am happy I contributed to spreading his thoughts in Italy.

Mat Forstater

Mat Forstater is a friend I regularly meet at the annual Minsky Summer Seminar at Levy.

Stephanie Kelton

Stephanie Kelton, now chief economist on the U.S. Senate Budget Committee, was often at the Minsky Seminar, before her latest appointment.

Randy Wray

Stephanie worked with Randy Wray, who is among the most prolific and influential economists at Levy.

If so many economists doing research together got it right on Greece (as well as on the 2007 recession) maybe it is not by the power of crystal balls, but because of robust, consistent economic thinking?


Call for Papers: Gender and Macroeconomics Conference

Michael Stephens | June 11, 2015

Gender and Macroeconomics: Current State of Research and Future Directions

A conference organized by the Levy Economics Institute of Bard College with the generous support of The William and Flora Hewlett Foundation

BGIA, New York City
108 W. 39 St., Suite 1000A
March 9–11, 2016

Call for Papers

The goal of this conference is to advance the current framework that integrates gender and unpaid work into macroeconomic analysis and enables the development of gender-aware and equitable economic policies. We are especially interested in topics relevant to Sub-Saharan African countries, including but not limited to:

  1. Relationships between economic structure (e.g., the relative importance of the service sector, agriculture, the care economy, trade, etc.), growth regime (wage-led versus investment-led growth), and gender inequities.
  2. Mechanisms and the extent to which unpaid work constrains women’s participation in paid work and access to economic opportunities.
  3. Implications of women’s labor market participation for their well-being and for intrahousehold allocation of time.
  4. Structural, macroeconomic, and microeconomic aspects of women’s employment in the informal sector.
  5. Formulation and analysis of gender-aware policy interventions.
  6. Frameworks for integrating the role of unpaid work in measures of well-being (e.g., time and income poverty).

We invite both theoretical and empirical studies and encourage submissions that employ innovative methodologies and new datasets. We are also interested in papers that provide a comprehensive picture of the state of the art, identify gaps, and indicate directions for future research.

Accommodation and travel-related expenses will be covered by the conference organizers. Please send your abstract via e-mail to Ajit Zacharias (

Important dates:

500-word abstract due July 1, 2015
Acceptance notifications e-mailed September 1, 2015
Final paper due February 1, 2016


Working Paper Roundup 5/15/2015

Michael Stephens | May 15, 2015

Financing the Capital Development of the Economy: A Keynes-Schumpeter-Minsky Synthesis
Mariana Mazzucato and L. Randall Wray
“Over [the postwar] period, the financial system grew rapidly relative to the nonfinancial sector … To a large degree, this was because finance, instead of financing the capital development of the economy, was financing itself. At the same time, the capital development of the economy suffered perceptibly. If we apply a broad definition—to include technological advances, rising labor productivity, public and private infrastructure, innovations, and the advance of human knowledge—the rate of growth of capacity has slowed. …

The key goal of this paper is to reconsider and discuss the role of finance … that is, how to restructure it to serve the ‘real’ economy, rather than itself, in order to produce both innovation-led growth and full employment. This requires bringing together the thinking of Keynes, Minsky, and Schumpeter, as well as understanding the role of the public sector as doing much more than fixing static market failures.”

Direct Estimates of Food and Eating Production Function Parameters for 2004–12 Using an ATUS/CEX Synthetic Dataset
Tamar KhitarishviliFernando Rios-Avila, and Kijong Kim
“This paper evaluates the presence of heterogeneity, by household type, in the elasticity of substitution between food expenditures and time and in the goods intensity parameter in the household food and eating production functions. We use a synthetic dataset constructed by statistically matching the American Time Use Survey and the Consumer Expenditure Survey. We establish the presence of heterogeneity in the elasticity of substitution and in the intensity parameter. […]

Our results suggest that the effectiveness of economic policies aimed at encouraging healthful cooking and eating habits is likely to vary by household type. Despite this variation, the elasticity of substitution is low for all household types, underscoring the challenges that monetary compensation-based policies may face in effecting a change in food production and eating behavior. Although we apply our dataset to food and the eating production process, the applicability of the dataset extends to the examination of the substitutability in other household production processes.”

On the Determinants of Changes in Wage Inequality in Bolivia
Gustavo Canavire-Bacarreza and Fernando Rios-Avila
“Contrary to the trend in the developed world, Latin American countries have shown a sharp decline in wage inequality during the past decade (2000–12). Bolivia has also experienced this decline, especially in the second part of the past decade. Using the methodology of RIF regression decomposition, we found that after 2006, wages increased across the wage distribution, with the largest changes observable at lower quintiles. … Among other factors, we find that there has been a sharp reduction in returns on higher education at the top of the distribution, as well as increases for returns for low educated workers, which has contributed to the decline of wage inequality. Similarly, wages in occupations with traditionally highly paid jobs have consistently decreased, further contributing to the wage inequality decline. It is possible that the observed changes in inequality are related to increases of the minimum wage, which have multiplicative effects on public-sector wage rates due to salary structures. …

It remains to be seen, however, if these improvements are long lasting, since the reduction in labor income inequality has not been accompanied by improvements in workers’ characteristics (education, experience, and skill). Although improvements in the working conditions (wages) of the most vulnerable populations is an important step toward reducing income inequality, to the extent that these changes are not accompanied by equal gains in workers’ productivity, the reductions in inequality might not be sustainable in the long run.”

Does Keynesian Theory Explain Indian Government Bond Yields?
Tanweer Akram and Anupam Das
“This paper empirically investigates the determinants of changes in Indian government bonds’ nominal yields. Changes in short-term interest rates, after controlling for other crucial variables such as changes in the rates of inflation and economic activity, take a lead role in driving changes in the nominal yields of Indian government bonds. This vindicates Keynes’s theories, and suggests that his views on long-term interest rates are also applicable to emerging markets. Higher fiscal deficits do not appear to raise government bond yields in India.”

Emerging Markets and the International Financial Architecture: A Blueprint for Reform
Jan Kregel
“If emerging markets are to achieve their objective of joining the ranks of industrialized, developed countries, they must use their economic and political influence to support radical change in the international financial system. This working paper recommends John Maynard Keynes’s ‘clearing union’ as a blueprint for reform of the international financial architecture that could address emerging market grievances more effectively than current approaches. […]

From the point of view of the current difficulties facing emerging market economies, the basic advantage of the clearing union schemes is that there is no need for an international reserve currency, no market exchange rates or exchange rate volatility, and no parity to be defended. Notional exchange rates can be adjusted to support development policy, and there is no need to restrict domestic activity to meet foreign claims. Indeed, there is no need for an international lender or bank, since debt balances can be managed within the clearing union. The external adjustment occurs by creating an incentive for export surplus countries to find outlets to spend their credits, which may be in support of developing countries. The system thus supports global demand. Since all payments and debts are expressed in national currency, independence in national policy actions and policy space are preserved. In modern terminology, countries retain monetary sovereignty within the constraint of external balance, which should correspond to full utilization of domestic resources.”


Elizabeth Warren on Structural vs Technocratic Financial Reform

Michael Stephens | April 16, 2015

From yesterday’s session of the 24th Annual Minsky Conference in Washington, D.C.:


Not All Macro Models Failed to Predict the Crisis

Michalis Nikiforos |

Noah Smith has a post on the failure of macro theory to predict the crisis. He concedes that DSGE models did very badly on this score, but, he continues, “There are no other models out there that did forecast the crisis” and there is no better alternative.

The word “better” is important here because some “angry heterodox” people have pointed Smith to at least one alternative—Wynne Godley’s Seven Unsustainable Processes—that had in fact predicted the crisis. However, Smith rejects this as “basically just chartblogging” [emphasis added]. He writes that

Yeah, sure, if you put out hand-wavey reports saying “capitalism sux, there’s gonna be a crash!” every year or two, you’re eventually going to be able to say “see, I told you so”. But that’s no replacement for real modeling.[sic]

First of all, there is nothing wrong with chartblogging. In fact, Noah Smith is a chartblogger—an excellent one.

Having said that, is Godley’s argument just hand-wavey-capitalism-sux-chartblogging or is there something more to it (perhaps even some real modeling)?

To begin with, Godley’s argument in the Seven Unsustainable Processes (which is a policy paper) is based on his theoretical work. Godley was one of the major proponents of what is today called Stock-Flow Consistent methodology. Some of his books and his writings (with real models and everything) are here, here, and here.

(The other major proponent of this methodology was James Tobin. His lecture when he was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was a manifesto of this methodology.)

Based on this theoretical work, in the 1990s Godley built a more policy-oriented macroeconomic model at the Levy Economics Institute. The simulations in the Seven Unsustainable Processes were produced with this model (and are thus far from chartblogging).

To understand the argument of the Seven Unsustainable Processes we need to keep two things in mind. First of all, the analysis is Keynesian, so it is aggregate demand that drives output, employment, and growth. These Keynesian results do not stem from imposing rigidities on an otherwise supply-side neoclassical model.

A second important piece of the analysis is a simple macroeconomic identity that comes straight from the National Accounts:

(Private Expenditure – Income) + (Government Expenditure – Income) = Current Account Deficit

In other words, the sum of the private sector and government sector deficit is always equal to the current account deficit. Accounting consistency requires that the flows expressed in the three balances accumulate into related stocks. For example, if the private sector is running a deficit, that will (ceteris paribus) tend to decrease its net worth and increase its debt and debt-to-income ratio.

The examination of these financial balances in relation to income (or GDP) is important because it gives clues about (i) central structural characteristics of an economy, (ii) which component of demand is driving growth, and finally (iii) what net assets/income ratio for each sector is implied from the current situation.

Having said this, we can now go to the crisis and the question of whether Godley actually predicted it or not. continue reading…


The State of Labor, New Models of Organizing, and the Future of Work

Michael Stephens | March 18, 2015

The Levy Institute and SEIU 775 are cosponsoring a labor workshop at Bard College on April 20th. The workshop, which is free and open to the public, will focus on three major themes, each corresponding to a panel: The State of the American Labor Movement, The Future of Work, and New Models of Organizing and Worker Power.

The flyer for the event, including the schedule and list of participants, is below (click to enlarge; download pdf here):

Bard Labor Workshop_Flyer p1

Bard Labor Workshop_Flyer p2crop


The 24th Annual Minsky Conference

Michael Stephens | March 5, 2015

Is Financial Reregulation Holding Back Finance for the Global Recovery?

Organized by the Levy Economics Institute of Bard College with support from the Ford Foundation

The National Press Club
Washington, D.C.
April 15–16, 2015

The 2015 Minsky Conference will address, among other issues, the design, flaws, and current status of the Dodd-Frank Wall Street Reform Act, including implementation of the operating procedures necessary to curtail systemic risk and prevent future crises; the insistence on fiscal austerity exemplified by the recent pronouncements of the new Congress; the sustainability of the US economic recovery; monetary policy revisions and central bank independence; the deflationary pressures associated with the ongoing eurozone debt crisis and their implications for the global economy; strategies for promoting an inclusive economy and a more equitable income distribution; and regulatory challenges for emerging market economies.

To register, please click here.


Lakshman Achuthan
Co-Founder and Chief Operations Officer, Economic Cycle Research Institute

Daniel Alpert
Managing Partner, Westwood Capital, LLC

Robert J. Barbera
Co-director, Center for Financial Economics, The Johns Hopkins University

Lael Brainard*
Member, Board of Governors of the Federal Reserve System

James Bullard
President, Federal Reserve Bank of St. Louis

Vítor Constâncio
Vice President, European Central Bank

Scott Fullwiler
Professor of Economics and James A. Leach Chair in Banking and Monetary Economics, Wartburg College

Michael Greenberger
Professor, School of Law, and Director, Center for Health and Homeland Security, The University of Maryland

Bruce Greenwald
Robert Heilbrunn Professor of Finance and Asset Management, Columbia University

Thomas Hoenig
Vice Chairman, Federal Deposit Insurance Corporation

Jan Kregel
Senior Scholar, Levy Institute, and Professor, Tallinn University of Technology

Paul McCulley

Perry Mehrling
Professor of Economics, Barnard College

Patricia Mosser
Deputy Director, Research and Analysis Center, Office of Financial Research, US Department of the Treasury

Dimitri B. Papadimitriou
President, Levy Institute

D. Nathan Sheets*
Under Secretary for International Affairs, US Department of the Treasury

Gillian Tett*
US Managing Editor, Financial Times

Paul Tucker
Senior Fellow, Harvard Business School

Éric Tymoigne
Research Associate, Levy Institute, and Professor of Economics, Lewis & Clark College

Elizabeth Warren
US Senator (D-MA)

Maxine Waters*
US Representative (D-CA, 43)

L. Randall Wray
Senior Scholar, Levy Institute, and Professor, University of Missouri–Kansas City

* Invited


Jobs for Greeks and for Americans, Too

L. Randall Wray | February 3, 2015

Here’s a nice piece:

The Workers’ Think Tank: With an eye on the United States and Greece, scholars at the Levy Economics Institute are developing plans to ensure full employment, by Sasha Abramsky, The Nation.

As Sasha notes, the Levy Institute has a novel approach to fighting unemployment: JOBS! Hardly anyone ever thinks about that—that the cause of unemployment is lack of jobs.

For some reason, virtually all policymakers and economists (including progressives) think that jobs will magically appear. True, some suggest that US unemployment is created because China (et al.) “steals” jobs that are rightfully due to America. Hence, the solution is to steal them back.

But why not just create more? Is it really that hard to come up with a list of things that people could usefully do, right here in America?

As Sasha writes, things appear to have improved in America,

“Yet scratch below the surface and you’ll see that the United States still has a considerable economic problem. While the official unemployment rate has fallen to 5.6 percent, the lowest since 2008, the percentage of the adult population participating in the labor market remains far lower than it was at the start of the recession. At least in part, headline unemployment numbers look respectable because millions of Americans have grown so discouraged about their prospects of finding work that they no longer try, and thus are no longer counted among the unemployed. Depending on the measures, only 59 to 63 percent of the working-age population is employed, far below recent historical norms.

Millions who lost their jobs during the recession have found work, but at lower wages and often for fewer hours per week than was the case before the financial collapse. In August, the US Conference of Mayors released data indicating that jobs created during the recovery paid an average of 23 percent less than jobs lost during the recession. That represents an extraordinary collapse in living standards for millions of people. Not surprisingly, according to the latest data, nearly one in six Americans are living below the federal poverty line.”

Unemployment remains far too high—and, more importantly, the employment rate remains far too low—because there are not enough jobs. Job seekers exceed job openings by a wide margin, across the entire spectrum of sectors. Here’s the latest data I could find (2012, and while things have improved a bit, it is not likely that we’d see much difference in 2014 data):

Unemployment by Sector

No matter where you look, there are plenty of job-seekers. And these data do not include those who’ve given up hope: official unemployment rates only include those actively seeking work. If you only hide 5 bones and send out 10 dogs to find them, you can be sure at least 5 dogs come back boneless. That’s what it still looks like across all sectors of our economy—far too few jobs out there. Five years into “recovery.” And with what looks like a possible slowdown coming.

(cross-posted from EconoMonitor)