Finance

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.

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.

The Institute for New Economic Thinking held its sixth Annual Conference from April 8 to April 11, 2015, in collaboration with the Organization for Economic Cooperation and Development (OECD) in Paris.

In his latest annual address at Cass Business School, Visiting Professor Lord Adair Turner warned that the world is caught in a ‘debt overhang’.

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.

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.

Rapid private-debt growth threw Japan into crisis in 1991 and did the same to the United States and Europe in 2008. China may be next.

How can we reconnect economic success to socioeconomic outcomes?