The Role of credit in a Keynesian monetary economy

Abstract

This paper describes the features of a monetary economy on the basis of Keynes's distinction between a real exchange economy and a monetary economy. In The General Theory, Keynes identifies the reasons for the non-neutrality of money by highlighting the store of wealth function of money; this approach has been adopted by most Keynesian economists. The aim of this paper is to show that such an approach only partially explains the reasons for money non-neutrality and that important elements which demonstrate the relevance of monetary variables emerge when the means of payment function of money is considered. Investigating the role of this function requires that we deal explicitly with how spending decisions are financed. The paper argues that the market for credit must be considered separately from the market for money, and that a viable credit theory can be built from Keynes's post-General Theory writings.     

Is Kaldor's Theory of Money Supply Endogeneity Still Relevant?

Contemporary monetary theory is characterized by the predominance of the monetarist thesis. Paradoxically, the widespread acceptance of the monetarists' conclusions has coincided with the disappearance of the stable relation between money stock and nominal income from the 1980s onwards. These results did not call the monetarist theory into question, but instead stimulated the elaboration of various proposals for the modification of the monetary authorities' operative schemes. Each of these proposals gives rise to some perplexity. These anomalies provide the justification for this paper, which sets out to analyse the characteristics of the money supply endogeneity theory, a theoretical approach initiated in the 1970s thanks to Kaldor's seminal contribution, with the objective of demonstrating the inconsistencies in the monetarists' conclusions. It is intended to show that the debate on the endogeneity theory developed by the post‐Keynesians has overlooked an essential aspect of Kaldor's theory, the examination of which permits: (a) the elaboration of an important criticism of monetarism; and (b) the development of a theory of credit and of financial intermediaries that highlights elements of Keynes's theory that have been neglected by the traditional interpretation.     

How efficient is maize production among smallholder farmers in Zimbabwe? A comparison of semiparametric and parametric frontier efficiency analyses

The controversial Fast Track Land Reform Programme in Zimbabwe that redistributes commercially-owned farmland to smallholder households has caused concerns about the efficiency of agricultural production in the country. In this paper, we estimate the efficiency of resource use among smallholder farmers in Zimbabwe when producing maize, the staple crop in the country. Using both a semiparametric model and a fully parametric stochastic frontier model, we find significant production shortfalls for smallholder maize production. While labor, capital, and land all significantly affect the total output, the estimated mean efficiency score for farms with less than 10 hectares of land (A1) appears to be under 0.75, and for the entire sample (A1 and A2) it ranges between 0.595 and 0.772. There clearly exists a great potential for maize farmers to improve the technical efficiency and increase the total output. Gender and age of the household head, access to extension services, and activities of other crops significantly affect the technical efficiency of smallholder maize production in Zimbabwe. We also find that all farms operate under increasing returns to scale and that the technical efficiency score tends to increase with the level of output.     

On Torrens's theory of profits

This paper is about the presence in Torrens's works of the 1810sand 1820s of a theory of profits based on an assumption of physicalhomogeneity between capital and product—a theory thatderived from the ‘corn ratio’ theory of profitsput forward by Ricardo in 1814–15. Some views about Torrens'stheory and its Ricardian origin held by S. Hollander and T.Peach are also briefly discussed and are shown not to be wellfounded, and not to take into account correctly the evolutionof Torrens's views on distribution.     

Social security and intergenerational equity

This paper considers the implications of social security for intergenerational equity. It shows that a balanced-budget unfunded system can be optimal even in a dynamically efficient economy without uncertainty and externalities. The relevant criteria for the optimality of the public transfer program are equity among generations and time consistency. The scheme can survive adverse shocks if the well-being of the elderly at each point in time is sufficiently valued.     

Underpricing of venture backed IPOs: a meta-analysis approach

ABSTRACT

Listing firms are subject to underpricing mainly because of asymmetries of information, but IPOs backed by a venture capitalist are generally found to be subject to less underpricing. Although this condition is commonly verified by the empirical evidence, a consistent number of studies finds contrasting results. This paper aims to answer to the question: do venture capitalists effectively reduce underpricing at IPO? Evidence provides a negative answer, with venture-backed IPOs having higher underpricing especially in US markets. Meta-regression results confirm the different effect of VC between US and European IPOs. Results overall suggest that other explanations on underpricing might hold in US markets.     

Forecasting industrial production and the early detection of turning points

In this paper we propose a simple model to forecast industrial production in Italy up to 6 months ahead. We show that the forecasts produced using the model outperform some popular forecasts as well as those stemming from an ARIMA model used as a benchmark and those from some single equation alternative models. We show how the use of these forecasts can improve the estimate of a cyclical indicator and the early detection of turning points for the manufacturing sector. This is of paramount importance for short-term economic analysis.The first draft of this paper was mostly prepared while Claudio Lupi was working as a Research Director at ISAE. The present version of the paper is a revision of a preliminary draft that was circulated under the same title as ISAE working paper 20/01. The authors would like to thank two anonymous referees, audiences at ISAE, Dublin (22nd International Symposium on Forecasting), and Ente Einaudi (econometrics seminars) for comments. Fruitful discussions and suggestions from Gianluca Cubadda, Sergio de Nardis, John FitzGerald, Antonio García-Ferrer, Franco Peracchi, and Tommaso Proietti are gratefully acknowledged. None of them is responsible for any remaining error. The opinions expressed in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of ISAE or its staff.First revision received: Ocotber 2002/Final revision received: May 2003     

Fiscal imbalances and the dynamics of currency crises

This paper analyzes links between the fiscal theory of the price level (FTPL) and the first generation models after Krugman (Journal of Money Credit and Banking 11 (1979), 311-325), exploring the idea that a synthesis between the two can become a new framework to analyze the fiscal dimension of currency crises. Working in a simple synthetic framework, we show how external nominal shocks can cause a fiscal imbalance and undermine currency stability, resolve two well-known paradoxes of the first generation model, discuss the role of seigniorage revenues, and illustrate how fiscal and interest rate policies interact to determine the magnitude and the timing of speculative attacks and devaluations.