Podcast on Gender Budgeting

Michael Stephens | June 18, 2021

Research Associate Lekha Chakraborty, recently chosen to join the governing council of the International Institute for Public Finance, was interviewed for an Onmanorama podcast on the question of gender budgeting and the advantages of centering care work.

Chakraborty argues policymakers in India should prioritize integrating a comprehensive care economy policy package in macroeconomic management, and laments the separation (disciplinary and otherwise) between questions of gender and of macroeconomics. In the context of the ongoing pandemic, she advocates sending monthly cash transfers to women engaged in otherwise unpaid and undervalued household work.


The Minsky Conference Returns

Michael Stephens | April 29, 2021

After pausing last spring due to the pandemic, the Minsky Conference is back. Join us next week, May 5-6.

It would be an understatement to say this has been an eventful year in world economies and financial markets. It is also a period in which we are seeing some signs of change in economic thought and policymaking. The conference has always been an important occasion for contact between heterodox and more mainstream economics; this year, that could be a particularly interesting dynamic to watch.

The full program is below. Register here for the online event.


Wednesday, May 5, 2021
9:15–9:30 a.m. Welcome and Introduction
Dimitri PapadimitriouPresident, Levy Institute
9:30–10:30 a.m. Speaker
Charles EvansPresident and CEO, Federal Reserve Bank of Chicago
MODERATOR: Binyamin AppelbaumEditorial Board Member, New York Times
MODERATOR: Robert HuebscherAdvisor Perspectives
SPEAKERS: Charles GoodhartEmeritus Professor of Banking and Finance, London School of Economics
Paolo SavonaChairman, CONSOB
Jan KregelDirector of Research, Levy Institute
12:00–1:00 p.m. Speaker
Robert Barbera, Director, J.H.U. Center for Financial Economics; Economics Department Fellow, The Johns Hopkins University
1:00–2:30 p.m. Session 2. WHAT’S AHEAD FOR THE US ECONOMY
MODERATOR: Michael StephensLevy Institute
SPEAKERS: Lakshman AchuthanCofounder, Economic Cycle Research Institute
Michalis NikiforosResearch Scholar, Levy Institute; Professor University of Geneva
Frank VenerosoPresident, Veneroso Associates, LLC
MODERATOR: David Henry, Reuters
SPEAKERS: Jason Furman, Aetna Professor of the Practice of Economic Policy, Harvard Kennedy School (HKS) and the Department of Economics at Harvard University
Bruce GreenwaldProfessor, Columbia Business School
L. Randall WraySenior Scholar, Levy InstituteProfessor, Bard College
Thursday, May 6, 2021
10:00–11:00 a.m. Speaker
Robert KaplanPresident and CEO, Federal Reserve Bank of Dallas
MODERATOR: Deborah SolomonEconomics Editor, New York Times
11:00 a.m.–12:30 p.m. Session 4. FINANCIAL GOVERNANCE AND REGULATION
MODERATOR: Peter CoyBloomberg
SPEAKERS: Michael GreenbergerProfessor, University of Maryland Law School
Kathryn JudgeHarvey J. Goldschmid Professor of Law, Columbia Law School
Patricia McCoy, Liberty Mutual Insurance Professor, Boston College Law School
12:30–2:30 p.m. Session 5. US FINANCIAL MARKET INSTABILITY
MODERATOR: Jeanna Smialek, New York Times
SPEAKERS: Jan Hatzius, Chief Economist, Goldman Sachs
Bruce KasmanManaging Director and Global Head of Economic Research, J.P. Morgan
James PaulsenChief Investment Strategist, The Leuthold Group, LLC
2:30–4:00 p.m. Session 6. WHAT’S AHEAD FOR EUROPE
MODERATOR: Dimitri Papadimitriou, Levy Institute
Lex HoogduinProfessor, Groningen University, the Netherlands; Founder, GloComNet
Denis MacShaneFormer Europe Minister, UK; Senior Advisor, Avisa Partners, Brussels
Gennaro Zezza, Research Scholar, Levy Institute; Professor, University of Cassino

continue reading…


Direct Job Creation in Greece

Michael Stephens | April 28, 2021

Senior Scholar Rania Antonopoulos recently participated in a webinar for the European Trade Union Institute, during which she discussed the rationale behind and experience with the implementation of the “Kinofelis” direct job creation program—a limited job guarantee for Greece. Watch her presentation below (accompanying slides are here).

The Levy Institute’s previous Strategic Analysis for Greece found that supplementing EU Recovery Funds with a more expansive job guarantee program (employing up to 300,000 people by 2022Q1) would help lift the Greek economy closer to its pre-pandemic growth trend.


The “Thing” with Job Guarantee Programs…

Martha Tepepa | February 21, 2021

In a February 18th front page article in the business section of the New York Times, Eduardo Porter surveys the potential for a job guarantee program. After starting with the caveat issued by Republican politicians—why trust your life choices to bureaucrats?—the piece goes on to present opinions of various experts on employment programs.

It is noteworthy that even among the specialists, not one has ever been involved in actual fieldwork or research in the various experiments with job guarantee programs. In an era in which we are asked to respond to facts, none of those consulted on the implementation of job programs has ever provided statistical analysis of results, nor studied the communities where the programs were actually successful in achieving their stated goals—which in general are much wider than the suggestions that the programs have not contributed significantly to lessen economic recessions, or that they are too expensive and that they might produce “useless make-work.” Indeed, there are no references to the many existing experiments.

Consider Argentina, where there is ample evidence that the Head of Households Program (HHP) played an important role in alleviating the recession and actually had a significant impact on the recovery of the economy after the 2001-2 economic, political, and social collapse. In situ fieldwork based on participant interviews conducted in urban irregular settlements shows[1] that the impact of program work experience was much greater than a simple impact on sustenance incomes. Indeed, program design produced significant impacts on gender equality and environmental preservation. continue reading…


The IMF as Deficit Owl? What’s Wrong with This Argument?

Jan Kregel | February 4, 2021

It seems the IMF aviary has turned on the hawks and embraced the deficit owls. Has the IMF joined the policy shift to MMT? Yes, in part, but it appears to be a viral form of MMT: according to Vitor Gaspar, the IMF’s head of fiscal policy, “Nations’ first priority should be vaccination, while the reduction of public debt is now far down the list of urgent actions… the main role of fiscal policy in the immediate future should be to be stimulative, to help restore economic growth, reduce unemployment and beat Covid-19.”

This is a big shift in IMF policy advice on post-crisis response, Chris Giles notes: “After the financial crisis a decade ago the fund recommended that countries should reduce their debt levels.”

But the pervasive pandemic is not the real reason for the change in feathered preferences: “Mr Gaspar said the IMF’s change of heart towards a relaxed approach to high levels of public debt stemmed from central banks’ reduction in interest rates. The drop in market funding costs means that, although advanced economies’ public debt has doubled as a share of GDP from 60 per cent to 120 per cent over the past 30 years, interest payments have halved from 4 per cent of GDP to 2 per cent.” Or perhaps the IMF is following Keynes’s wish for the euthanasia of the rentiers?

If fiscal policy is the weapon to fight the war against the coronavirus, then the same logic used by Wright Patman, MMT’er before his time, and every other sensible politician when faced with war finance, should raise the question of why the government should pay interest on the money it issues in order to spend. So, to follow the new IMF fiscal logic: If interest rates on government debt were zero, which is very close to conditions in many countries—indeed, some are negative—this should mean that the size of debt ratios should be even less of a concern. But zero interest rate debt is called currency. If government expenditure were financed by currency issue, following Congressman Patman, the government would not have to pay interest. And would it then follow the IMF could stop worrying about debt ratios?

But this is not the problem with the debt argument. Other things being equal, the level of interest rates has an impact on the total debt level associated with a particular level of the deficit. Higher interest rates should then be associated with higher debt ratios and vice versa, so it should be clear that the IMF position has not changed that much: it still prefers lower interest rates and the associated lower debt ratios because that means that it will require less austerity to reduce the debt burden in future.

However, while interest rates represent the costs of debt, they also represent income to someone in the system. Could higher interest rates make a lower deficit necessary to achieve a given impact on growth and employment and lead to lower debt ratios? It largely depends on who receives the interest as income—retired savers and pension recipients, or financial institutions, or even the Central Bank—and the impact on growth and employment. Low interest rates help some financial institutions, but for pension funds and insurance companies they can be a source of incipient financial instability.


Jiu-Jitsu Comes to the Stock Market

Jan Kregel | January 29, 2021

The core philosophy of this Japanese defensive art used by the weak against the stronger Samurai is to mobilize the opponent’s greater force to your own advantage. Many have criticized the run-up in the quotation of the GameStop shares as a violation of market principles or regulations. Far from it, it simply represents the fact that day traders may be dumb money, but they have understood how to apply jiu-jitsu.

If the intent was simply to profit from trading the stock, no retail trader could ever compete with the institutions. To attempt to directly manipulate the price of the stock through outright purchase or sale would be impossible. The strategy that was used was simply to recognize, as Softbank had done earlier in the year, the nature of market hedging.

There is a myth that hedging can eliminate risk. This almost never happens, unless there is a perfect match between risk of gain and risk of loss. In all other cases, hedging requires compensation to transfer the risk—to those more able to bear the risk, as Greenspan would say. After the 2008 financial crisis, we learned that ability had nothing to do with it; it was who was willing to bear the loss, and most were not able and required the government to bail them out.

So in the run-up in the market quotes of GameStop shares, this was not really a question of the dubious behavior of a bunch of day traders; it was an application of market knowledge of how financial contracts work in practice. continue reading…


Why “Output Gap” Is Inadequate

Lekha Chakraborty | January 4, 2021

by Lekha Chakraborty and Amandeep Kaur[1]

The macroeconomic uncertainty during the Covid-19 pandemic is hard to measure. Economists and policymakers use the “output gap” variable to capture “slack.” It is a deviation between potential output and actual output, which is a standard representation of a “cycle.” The potential output is an unobserved variable. There is an increasing concern about the way we measure potential output—decomposing the output into trends and cycles. This is because the business cycle is not always a “cycle.” Sometimes, the “cycle is the trend.”[2]

When macroeconomic crises and recessions tend to “permanently” push down the level of a country’s GDP, it is inappropriate to assume that output will bounce back to previous levels. The notion of the output gap is ill-conceived and ill-measured. Scholars have highlighted the significance of “hysteresis” (the dependence of economic path on history) in analyzing the output dynamics in crisis.[3] Against the backdrop of the Covid-19 pandemic crisis, there is a renewed interest in hysteresis and business cycles. The state of the economy and the level of GDP are history dependent (hysteresis). The concept of hysteresis has urgent relevance for designing apt fiscal and monetary policies to tackle low demand during recessions. continue reading…


Increasing Diversity in Economics Is Not Only a Moral Obligation

Luiza Nassif Pires | December 8, 2020

November 3rd, 2019, I delivered remarks on the closing panel of The New School/UMASS Amherst Graduate workshop held in New York City. The panel theme was “Broadening the boundaries of political economy”. I have since graduated and successfully gone through the job market. I hope my remarks from last year can serve as encouragement for fellow female, black, African-American, Latinx, and ethnic minority economic students, as well as all students in the field who have ever felt discriminated against. I also hope that it can help my colleagues understand the importance of fighting against misogyny and racism in the field.


“Broadening the boundaries of political economy” Remarks by Luiza Nassif-Pires:

“A couple of weeks ago, when Mark [Setterfield] sent the e-mail announcing the theme of the closing panel this year “Broadening the boundaries of Political Economy” I had this unstoppable urge to participate and say something about diversity. I really had to take a step back last night (the second time my watch said it was 1 am) to analyze: What on earth was I thinking when I decided to add one more commitment to my crazy ‘thesis writing while working four jobs and going on the job market’ schedule? What is this urge to say something about diversity that kept me working late on a Saturday night?

To explain this urge I will try my best to walk you through a very specific sentiment I had last night. You see, I have been educating myself to go on the job market, I have been studying feminist economics for a while; this means reading a lot about discrimination. So I really thought I already knew all the ways in which being a Brazilian female will affect my ability to not become yet another statistic in the leaking pipeline of the gendered economic profession. So, please, picture yourself exhausted from a lot of work and proud of a paper forthcoming co-authored with a male Professor suddenly reading this:

“Sarsons (2015) using data from the CV of economists,…, documented that, while an additional coauthored paper for a man has the same effect on the likelihood of tenure as a solo-authored paper, women suffer a significant penalty for coauthoring, especially when their coauthors are men.”

Bayer and Rouse (2016)

Well, clearly my urge to be here today discussing diversity is a survival reflex. But also, it really takes someone that feels this burden to be able to express and expose it. With that comes a certain moral obligation, one that I take seriously as a privileged Brazilian woman in a Ph.D. program in the US.

Around now you should be asking yourself, what does all this have to do with broadening political economy? Well, I have established so far that I believe that fighting for diversity is a survival reflex and a moral obligation. I want to now argue that it is also necessary to improve our theories. continue reading…


The Pandemic, “Flexible” Work, and Household Labor in Brazil (Interview)

Luiza Nassif Pires | December 1, 2020

[The following is an interview by Paula Quental of Lygia Sabbag Fares, one of my coauthors for this post on how home quarantine has impacted domestic violence. The interview originally appeared in Portuguese and is posted here with permission.]


Labor market deregulation is bad for all workers and even more perverse for women, says economist.

According to Lygia Sabbag Fares, a specialist in Labor Economics and Gender Studies, labor reform is a way for the powerful to transfer the burden of productive costs to workers. According to Dr. Fares, there is no indication that a more egalitarian division of domestic chores between men and women, a supposed “gain” from the pandemic, will be sustainable in the future.

by Paula Quental

The discourse in defense of work flexibility—including working hours with a bank of hours, part-time, work on weekends, and relay shifts, among other measures—usually touts the advantages for workers, especially for those (in general, women) who need to reconcile hours worked with domestic duties. This argument has gained momentum during the COVID-19 pandemic, considering the spread of the home office and a supposedly more equal division of domestic tasks between men and women.

According to the economist Lygia Sabbag Fares—professor at the Escola Superior de Administração e Gestão Strong, certified by the Getúlio Vargas Foundation (FGV), PhD in Economic Development and specialist in Labor Economics at Unicamp, holder of a master’s degree in Labor Policies and Globalization from the University of Kassel and the Berlin School of Economics and Law (Germany)—the reality is quite different from what the work flexibility enthusiasts believe. According to her studies, these processes “are driven by capital, with the objective of obtaining profits and externalizing costs, following the capitalist model of production under the aegis of neoliberalism”. The result is severe job insecurity, or greater pressure in the case of more competitive jobs, and in both situations, women are the most affected.

There is also no guarantee, according to her, that in the post-pandemic scenario, couples will still push to share domestic chores relating to their home and children. The net result of this period seems to be more negative than positive, considering the increase in domestic violence and divorce.

Read the following interview with the Brazilian professor, who has just received an invitation to teach at the Brooklyn Institute for Social Research, in the United States: continue reading…


The Reserve Bank’s Pandemic Predicament

Lekha Chakraborty | June 24, 2020

by Lekha Chakraborty and Harikrishnan S

As the Reserve Bank of India Governor Shri Shaktikanta Das puts it upfront, these are extraordinary times, and we need to respond with “whatever it takes” to deal with the pandemic. Over the past few days, our hope for systematically “flattening the curve” by containing the COVID-19 pandemic and moving to a quick V-shaped or U-shaped recovery is waning[i]. Evidence is increasingly pointing towards the situation worsening to a dual crisis — a public health crisis and a macroeconomic crisis — like never before.

The IMF projections substantiate that the drag of the pandemic on global growth could be to the extent of -3%. This is a major revision in the global growth rate over a very short period of time. The IMF highlighted that “the Great Lockdown is the worst economic disruption since Great Depression, and far worse than the global financial crisis,” and its estimates suggest that “the cumulative loss to global GDP over 2020 and 2021 from the effects of the COVID19 pandemic would be around $9 trillion, greater than the economies of Japan and Germany combined.”[ii] *(The IMF has since released its latest [June 2020] estimates, showing global growth declining 4.9 percent, for a cumulative, 2020-21 loss of $12 trillion.)

How have the central banks responded to this crisis?  This is evidently uncharted territory for the central banks — how to deal with “life versus livelihood” issues. The pandemic economics of central banks is twofold. One is the focus on measures that relate to instantaneous economic “firefighting”: for instance, how to ensure liquidity infusion into the system to stabilize the market reactions. The second is the long-term policy imperatives. As this crisis is of an unprecedented scale, it calls for unprecedented policy responses. continue reading…