Meanwhile, at the Levy Institute
The Levy Institute, a Post-Keynesian think tank housed out of Bard College in NY state, has some new working papers up on its site that are worth a mention. The first two are from Randall Wray and the third from Dimitri Papadimitriou:
The Continuing Legacy of John Maynard Keynes
This working paper examines the legacy of Keynesâ€™s General Theory of Employment, Interest, and Money (1936), on the occasion of the 70th anniversary of the publication of Keynesâ€™s masterpiece and the 60th anniversary of his death. The paper incorporates some of the latest research by prominent followers of Keynes, presented at the 9th International Post Keynesian Conference in September 2006, and integrates this with other work that has come out of the Keynesian tradition since the 1940s. It is argued that Keynesâ€™s contributions still provide important guidance for real-world policy formation.
A Post-Keynesian View of Central Bank Independence, Policy Targets, and the Rules-versus-Discretion Debate
This paper addresses three issues surrounding monetary policy formation: policy independence, choice of operating targets, and rules versus discretion. According to the New Monetary Consensus, the central bank needs policy independence to build credibility; the operating target is the overnight interbank lending rate, and the ultimate goal is price stability. This paper provides an alternative view, arguing that an effective central bank cannot be independent as conventionally defined, where effectiveness is indicated by ability to hit an overnight nominal interest rate target. Discretionary policy is rejected, as are conventional views of the central bankâ€™s ability to achieve traditional goals such as robust growth, low inflation, and high employment. Thus, the paper returns to Keynesâ€™s call for low interest rates and euthanasia of the rentier.
The Effects of a Declining Housing Market on the U.S. Economy
Longstanding speculation about the likelihood of a housing market collapse has given way in the past few months to consideration of just how far the housing market will fall and how much damage the debacle will inflict on the economy. In this paper, we discuss recent developments related to the housing market; econometrically assess the magnitude of the impact of housing price decreases on real private expenditure; assess the importance of new types of mortgages and mortgage-related securities; and briefly analyze possible policy responses.