Macroeconomics

Henry George, land speculation, and economic growth and transformation

There has long been a concern that speculation on land (or other non-produced assets) may adversely affect economic performance by diverting scarce savings away from productive investment. The central objective of this paper is to show in the simplest possible model (i) how land speculation resulting from land market reform affects long-term productivity and economic growth rates, and (ii) how government policies and institutional arrangements can mitigate the adverse effects of land speculation and increase growth and overall welfare. We analyse the effects of land taxation in a way that goes beyond the suggestion by Henry George (1879) who argued that the fairest and most efficient tax was a tax on land. Our findings differ from the widely accepted views that looser financial and monetary policies should be good for growth. Instead we argue that, without financial regulations that curb the adverse effects of land speculation, such policies can end up encouraging land speculation financed by borrowing, rather than stimulating productive investment. We conclude that financial liberalization and lower interest rates can be harmful to the long-term economic growth and welfare.

By Savannah Lucas, ago

Overlapping generations models, multiplicity of steady states and momentary equilibria, and economic fluctuations

This paper examines the simplest OLG models with capital accumulation, demonstrating three results that stand in marked contrast to those of the standard model: first, the possibility of multiple steady states; second, the possibility of multiple momentary equilibria under rational expectations; third, one of the implications of multiple momentary equilibria is that dynamics may be marked by complex fluctuations (lacking even periodicity), but still within well-defined bounds. We provide quite general conditions (with general utility and production functions) under which, in the simplest of OLG models, there can be multiple steady states, multiple momentary equilibria, and complex dynamics.

By Savannah Lucas, ago

The European Central Bank and the Economic Government of Europe

The European Central Bank has by and large applied the right monetary policy. Nevertheless, we argue for a range of reforms that would make the ECB more effective and accountable. We also suggest a role for the European Parliament in setting monetary policy targets. And with EU and Euro area enlargement around the corner, we propose reforms to the composition of the ECB’s policymaking council. Finally, we make the case for a thorough revamp of the Stability and Growth Pact, which strangles Europe’s economic growth.

By Aleksey (Adminstrator), ago

Capital Flows and Macroeconomic Policy in Emerging Economies

This paper develops the proposition that capital flows must be given explicit consideration in macroeconomic policy making in emerging economies. If policy makers want capital inflows to be well-behaved (to be neither too scarce nor too plentiful; to be steady rather than volatile), it is not enough to run prudent fiscal and monetary policies. In fact, capital inflows can make the normal tasks of macroeconomic policy very difficult indeed. The conventional (or “Wall Street”) view is that capital flows take care of themselves if macro policies are “correct”. Here we develop an alternative paradigm (labeled the “structuralist” view) that assigns a high degree of exogeneity to capital flows. Since they are typically large and volatile, such flows can wreak havoc with macroeconomic policy.

By Aleksey (Adminstrator), ago

Argentina: Macroeconomic Performance and Crisis

The paper is presented in two parts. The first discusses two key issues related to the Convertibility regime established in 1991 and its final crisis in 2001. The second part analyzes the economic performance in the nineties with a focus on the effects on the labor market. One key issue refers to the policy regime and the economic performance it led to. The paper claims that the case is similar to other Latin American experiences of financial liberalization and opening that ended up in crisis.

By Aleksey (Adminstrator), ago

Institutions of Macroeconomic Management

This paper demonstrates that institutions matter for the macro-economy a great deal, and therefore that we need to explicitly incorporate institutional factors in macroeconomic theory. It draws extensively on the history of the development of institutions of macroeconomic management in today’s developed countries while Chang’s ultimate interest is the role of institutions in the macroeconomic management in developing countries.

By Aleksey (Adminstrator), ago
Translate Website »