This paper examines the Post Keynesian proposition that the forward rate is determined by covered interest parity and that it is not a predictor of the future spot rate as suggested by the unbiased effeiciency hypothesis. One implication of the failure of unbiased effeciency is that it leads to the faliure of real interest parity, implying that the monetary authorities can control interest rate...

When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use ine¢ cient policies such as wasteful public spending or future commitments to in‡ate. We conclude that in the New Keynesian model,...

In his ‘Comments’, Tom Michl defends the proposal for a fully funded pension scheme based on a saving-led ‘classical growth model’ against my Keynesian contention that a higher saving supply would be deflationary in both the short run and the long run. Michl adds a further argument that an increase in the saving rate associated with a lower interest rate may speed up the accumulation process. I...

We show that endogenous variation in risk aversion over the business cycle can jointly explain financial market responses to high-frequency monetary policy shocks with standard asset pricing moments. newly integrate a work-horse New Keynesian model countercyclical via habit formation preferences. In model, surprise increase rate lowers consumption relative habit, raising aversion. Endogenously ...

We introduce a voting model that is similar to a Keynesian beauty contest. There are two types of voters-copycat and independent-and two candidates. We find that the phase transition in this system is at the upper-limit of t where t is the time (or the number of the votes). If copycats are a majority or number half, the voting rate converges more slowly than in the binomial distribution. If ind...

Most of the scholarly reinterpretations of the Principle of Effective Demand are not in line with Keynes’s original presentation of it in Chapter 3 of the General Theory. To substantiate this claim, Keynes’s definition is here first reproduced and then compared with different reinterpretations of the principle by textbook authors, and Neo-Ricardian, Kaleckian, and Post Keynesian economists. A n...

The Keynesian multiplier effect is reinterpreted and several issues that may have misled assessments of the effect of fiscal spending are discussed. It is shown that even in the textbook Keynesian framework some transfer policy ‘reduces’ aggregate demand and that public works spending may completely crowd out private consumption. Useless public works are found to be equivalent to transfers alth...

The undertaken study assesses the empirical merits of the Post Keynesian doctrine as this is reflected by both the Keynesian as well as the Kaleckian theoretical approaches to investment determination. A GMM panel data methodology provides the econometric platform upon which the respective models have been tested. Annual time series data has been used, spanning from 1970 to 2005, for the G7 eco...