Working Papers

Ten hypotheses presented in the session “Beyond Deficits, Austerity and Deflation” at INET Conference 201

Recent weeks have surfaced an intense exchange of top-level finger pointing, both between Congress and the leadership of the Federal Reserve System, between Fed officials and executives in the private sector and within the Fed between the Board of Governors and the New York Reserve Bank.

It is impossible to ignore material inequality. Wealth, and the goods that come with it, are accumulating at the top of society while others seem to be struggling in the middle and bottom.

The inequality of income and wealth is one of the defining issues of our time, in terms of both its social and macroeconomic implications. In this article, I focus on the macroeconomic implications of inequality. In particular, it is possible to identify four themes on which there seems to be growing consensus among many economists especially in the various heterodox traditions, but also increasingly in the mainstream of the economics profession:

This paper empirically examines the effects of the Federal Reserve’s Large Scale Asset Purchases (LSAP) on bank profits.

Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks.

We call attention to the class of models that serve as the foundation for the rational expectations hypothesis (REH). Models in this class rule out completely any structural change that cannot be fully anticipated with a probabilistic or other quantitative rule. REH models are abstractions of rational decision-making, but only in a hypothetical world in which participants can fully anticipate when and how they might revise their understanding of the process driving outcomes.

A Ruskinian framework for economic justice.

We propose several multivariate variance ratio statistics. We derive the asymptotic distribution of the statistics and scalar functions thereof under the null hypothesis that returns are unpredictable after a constant mean adjustment (i.e., under the weak form Efficient Market Hypothesis). We do not impose the no leverage assumption of Lo and MacKinlay (1988) but our asymptotic standard errors are relatively simple and in particular do not require the selection of a bandwidth parameter. We extend the framework to allow for a time varying risk premium through common systematic factors.

We develop adjustments to align the NIPA measures of key household flows with cash flow concepts that better reflect household budgets and demand.

This paper discusses the main issues about increasing inequality, whether it matters and its impact on economic activity and growth. It starts by briefly considering the empirical evidence of the share of income going to the top one percent since 1945 in the advanced countries. It then considers whether this represents an increase in the productivity of the top one percent or merely an extraction of economic rent.

This chapter surveys experimental research on networks in economics.

This text is part of a research project still in working progress that collects different contributions by the author and rewrite and reanalyse some reflections, already present, in a different form, in some publications:

It is highly fitting to have a panel devoted to ‘teaching economics’ in Paris. No less than 15 years ago, in 2000, in downtown Paris, a group of students from the École Normale Supérieure, one of France’s élite schools, wrote a petition asking economics teaching to be devoted to the study of real-world problems, with an instrumental use of mathematics rather than to the description of imaginary worlds based on meaningless formalizations.