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Editor’s Choice : Money In Modern Macro Models: A Review of the Arguments
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Abstract: This paper provides an overview of the role of money in modern macro models. In particular, we are focussing on New Keynesian and New Monetarist models to investigate their main findings and most significant shortcomings in considering money properly. As a further step, we ask about the role of financial intermediaries in this respect. In dealing with these issues, we distinguish between narrow and broad monetary aggregates. We conclude that for theoretical as well as practical reasons a periodic review of the definition of monetary aggregates is advisable. Despite the criticism brought forward by the recent New Keynesian literature, we argue that keeping an eye on money is important to monetary policy decision-makers in order to safeguard price stability as well as, as a side-benefit, ensure financial market stability. In a nutshell: money still matters. Keywords: Money, New Keynesian model, New Monetarist model, financial intermediaries. |
Editor’s Choice : National Economics
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Abstract: With the slow recovery from the Global Economic Recession that began in 2008 and its lingering high unemployment in the United States and Europe, in spite of the best efforts of governments and central banks to remedy it, it may be helpful to suggest some adjustments in current economic thinking. One adjustment may be found in the introduction of National Economics, in addition to macro and micro-economic theory, to better engage issues of free trade, the international outsourcing of manufacturing and research and development known as globalization, protectionism, Chinese mercantilism, and national investment policies, which may accompany the preparation of economic stimulus packages. While free trade is generally acknowledged as a positive factor in contributing to economic growth, it has been used by mercantilists, both countries and corporations, as a cloak to achieve a National Income redistribution to enrich themselves at the expense of reducing employment, and wages and salaries within a country, and to substitute poorly made or low quality goods for goods of better quality. One issue of National Economics that stands to be addressed is the contribution of Chinese mercantilism to the Global Economic Recession and its effect on unemployment rates. A major trading partner with the United States, Europe, and other countries, China uses a substantially undervalued currency compared to the U.S. dollar to increase its export of manufactured goods and economic growth rate, while suppressing the manufacturing sector in its trading partners. Within many countries, large trade imbalances with China play a role in the distribution of National Income by depressing employment, wages, salaries, and investment. While mercantilists claim that these reductions in employment, wages, and salaries are offset by the proliferation of inexpensive Chinese goods, low quality goods do not compensate for reductions in employment and investment. A second issue of National Economics that stands to be addressed, at least within the United States, is the need to prepare economic stimulus packages that represent a balance of new spending along with adjustments in entitlement programs and a reworking of the current regulatory environment, which policymakers use to reward corporate dinosaurs and financial manipulators, while the constrict the ability of small banks and lending institutions such as credit unions to make consumer loans and finance mortgages, with the effect of repressing the nation's economy. Finally, some thoughts are given regarding the effect of Chinese mercantilism on Taiwan's economy, and Japan's effort to renew its economy. Keywords: Bank problems, Chinese mercantilism, money class, national economics, stimulus.Download Full Article |
Editor’s Choice : Mathematics & Science Education and Income: An Empirical Study in Japan
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Abstract: Since the second half of the 1990s, the decline in academic standards in mathematics and science among undergraduate students in Japan has been noted. Despite this, problems in science education have become increasingly severe, and their impact is having a mounting effect on Japan’s economy. This paper studies the return to a university education in Japan by taking into account the relative ranking of the universities. We present an empirical analysis of how annual income differs depending on whether a major is natural science or humanities. We have found that science graduates have a higher average income than humanities graduates indicates that the added value they are producing is higher than that of humanities graduates.Of particular interest is the fact that a comparison of humanities graduates of A rank universities who did not sit admission examinations in mathematics with science graduates of B rank university showed that it was the science graduates who recorded higher average income at every age grade. The above comparison also reveals that even those humanities graduates of A rank universities who did sit admission examinations in mathematics are out-earned by science graduates of B rank universities in the under 30 and 55 and over age groups. Keywords: Mathematics education, income, humanities, science, admission difficulty.Download Full Article |
Editor’s Choice : On Poverty Traps and Equilibria in Growth Models
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Abstract: We show that, contrary to a widely spread error, when the savings and the population growth rates are constant, an unstable equilibrium cannot exist in a neoclassical model, because it would imply an increasing average productivity of capital and therefore a negative marginal productivity of labor. As a consequence, a poverty trap, a dire reality, cannot be explained by such an unstable equilibrium, nor cannot it be eliminated by a capital "big-push". We finally give necessary conditions for an economy to escape a poverty trap. Keywords: Unstable equilibria, growth models.Download Full Article |
