Статті в журналах з теми "Classical Keynesian Approach"

SummaryThe purpose of this paper is to understand disequilibrium phenomena at a disaggregated level. By using data on French firms, we carry out the estimation of labor demand model with two regimes, which correspond to the Keynesian and classical hypotheses. The results enable us to characterize classical firms as being particularly good performers: they have more rapid growth, younger productive plant and higher productivity gains and profitability. Classical firms stand out, with respect to their production function, by higher growth rate of disembodied technical progress and, with respect to their accumulation behaviour, by more rapid investment and replacement rates which lead to the rejuvenation of their capital stock. But the production-employment elasticities and production-capital elasticities, as well as the accelerator, are identical for classical and Keynesian firms.

New Developmentalism, which Carlos Medeiros (2020) criticizes, is a new theoretical approach to development macroeconomics and the political economy of middle-income countries. It is a system of thought whose roots are in Post-Keynesian economics and Classical Developmentalism, but it is an open and growth-oriented approach. This paper summarizes the new theoretical framework. Thereafter, it responds to the indictments that New Developmentalism is neither a Post-Keynesian nor a developmental theory, but rather an expression of the ‘market failure approach,’ ‘methodological nationalism,’ the ‘mistaken’ association of exchange-rate economic growth, etc. The paper then argues that New Developmentalism is a system of thought that responds to the new realities of the globalized world and compares New Developmentalism with Classical Developmentalism.

The authors consider Macroeconomics as a set of interrelateol research programmes which incorporates such schools of thought as Neoclassical, Keynesian, Neoclassical synthesis, Monetarism, New Classical and New Keynesian. This approach has a number of competitive advantages over a standard course and provides new opportunities for researchers, academics, entrepreneurs and students of economic theory.

The fundamental aim of this paper is to lay out essential elements concerning classical economic theory about employment, and compare them with the Keynesian approach. In other words, this document shows a comparative-contrasting study of the classical and more modern theoretical claims, concerning employment. Since employment is a crucial variable related to economic growth and development, this paper is focused on a revision of conceptual issues concerning such a critical indicator. The approach presented here is important not only for professional economists but also for other social scientists. One of the major conclusions of this study is referred to the evidence that the Keynesian “General Theory” is not precisely the most completed and updated theoretical approach to solve problems of employment, but it has a particular richness in its contents that is important to rescue; in fact that theory was extremely useful to undertake unemployment and economic growth problems during the Great Recession in the United States.

ABSTRACT This paper deals with involuntary unemployment. We suppose that wages fail to clear markets and undertake a disequilibrium analysis of the effect of unemployment insurance (U.I.) on unemployment and production. The disequilibrium model is so constructed as to take into account the impact of U.I. on all markets. The neo-classical paradigm based on an equilibrium approach is contrasted with the neo-keynesian paradigm which assumes persistent disequilibrium. It is shown in this perspective that U.I. has an impact on unemployment when the latter is keynesian in nature rather than classical. We conclude that in order to evaluate empirically the effect of U.I., the various kinds of unemployment under analysis must be distinguished. We find moreover, that a disequilibrium framework is most appropriate for the study of unemployment.

En comparación con la posición neoclásica, los post-keynesianos y los circuitistas desarrollaron el “enfoque endógeno” de dinero, destacando el papel de los bancos en la creación del dinero y considerando que la tasa de interés es exógena (fijada por el banco central). Los post-keynesianos y los circuitistas, desarrollan sus argumentos utilizando algunas perspicacias de Keynes: el “motivo especulación”, su concepción del crédito, el principio de una demanda eficaz y la función de la incertidumbre. Debido a este fondo común la frontera entre estas corrientes de pensamiento es confusa y cambiante. Por lo tanto, a menudo es difícil apreciar las diferencias entre estas. Palabras clave: dinero, post-keynesianos. Clasificación JEL: E40, E12 Abstract: Contrary to the neo-classical position, post-keynesians and circuitists developed the endogenous money approach, emphasising the function of banks in the creation of money and considering that the interest rate is exogenous (fixed by the Central Bank). Both, Post-keynesians and Circuitists, develop their arguments using some of Keynes' insights: the “finance motive”, his conception of credit, the principle of effective demand and the role of uncertainty. Because of this common background the frontier between these currents of thought is fuzzy and changing. Therefore, it is often difficult to appreciate the differences between them. Key words: money, post-keynesian. JEL: E40, E12 Résumé: Par opposition à la position neo-classique, les post-keynésiens et le circuitists ont développé l'approche endogène d'argent, soulignant le rôle des banques dans la création de l'argent et considérant que le taux d'intérêt est exogène (fixé par la banque centrale). Tous les deux, Post-Keynésien et Circuitists, développent leurs arguments en utilisant certaines perspicacités de Keynes: “motif de spéculation”, sa conception du crédit, le principe d'une demande effective et le rôle de l'incertitude. En raison de ce fond commun la frontière entre ces courants de pensée est brouillée et changeante. Par conséquent, il est souvent difficile d'apprécier les différences entre elles. Mots Clés: argent, post-keynésien.

Uno and Sekine considered the early postwar stage as a qualitative divergence from the structural characteristics of capitalism resulting in a gradual ex-capitalist transition. For Westra, the disintegration happens when self-commodified money capital in the money and capital markets disintermediates itself from the value augmentation processes in the production sphere. Westra develops a theory of financialization of globalization distinctive from the post-Keynesian notion of finance-led growth regime or the classical Marxist notion of finance capital.

This article looks at the implications of labor-supply limits and endogenous wage growth in the Duménil and Lévy model. A long-run relationship is established between the employment rate and capitalists’ decisions to reinvest profits. Elements of a Marxian approach to macroeconomic policy are sketched. New conditions are derived for being Kaleckian/Keynesian in the short run and classical Marxian in the long run.

Keynes is back. Not only in the discourse of political economy but also in the debates around an "alternative economic policy". This article outlines Keynes's approach to the political economy of capitalism and offers a critique in the tradition of Marx's critique of classical political economy. It points out the limits and conditions of radical reforms and criticizes the illusions attached to the idea of a new Keynesian project.

Adam Smith being its founder, in the Classical School, which gives prominence to supply and adopts an approach of unbiased finance, the economy is always in a state of full employment equilibrium. In this system of thought, the main philosophy of which is budget balance, that asserts that there is flexibility between prices and wages and regards public debt as an extraordinary instrument, the interference of the state with the economic and social life is frowned upon. In line with the views of the classical thought, the classical fiscal policy is based on three basic assumptions. These are the "Consumer State Assumption", the assumption accepting that "Public Expenditures are Always Ineffectual" and the assumption concerning the "Impartiality of the Taxes and Expenditure Policies Implemented by the State". On the other hand, the Keynesian School founded by John Maynard Keynes, gives prominence to demand, adopts the approach of functional finance, and asserts that cases of underemployment equilibrium and over-employment equilibrium exist in the economy as well as the full employment equilibrium, that problems cannot be solved through the invisible hand, that prices and wages are strict, the interference of the state is essential and at this point fiscal policies have to be utilized effectively.Keynesian fiscal policy depends on three primary assumptions. These are the assumption of "Filter State", the assumption that "public expenditures are sometimes effective and sometimes ineffective or neutral" and the assumption that "the tax, debt and expenditure policies of the state can never be impartial".

Real business cycle theory is the latest incarnation of the classical view of economic fluctuations. It assumes that there are large random fluctuations in the rate of technological change. In response to these fluctuations, individuals rationally alter their levels of labor supply and consumption. The business cycle is, according to this theory, the natural and efficient response of the economy to changes in the available production technology. In this essay, I appraise this newly revived approach to the business cycle. In my view, real business cycle theory does not provide an empirically plausible explanation of economic fluctuations. Both its reliance on large technological disturbances as the primary source of economic fluctuations and its reliance on the intertemporal substitution of leisure to explain changes in employment are fundamental weaknesses. Moreover, to the extent that it trivializes the social cost of observed fluctuations, real business cycle theory is potentially dangerous. The danger is that those who advise policymakers might attempt to use it to evaluate the effects of alternative macroeconomic policies or to conclude that macroeconomic policies are unnecessary.

This paper critically analyses the literature spawned by Peter Hall and David Soskice’s influential book on the varieties of capitalism. It takes as a starting point the critiques within the comparative political economy literature about the supply-side views on economic growth, and the problems with emphasizing the nature of firm behavior as the source of institutional variety. It argues that demand-led growth, as discussed by Post-Keynesian authors, provides an important alternative to the conventional approach to the explanation of varieties of institutional experience. It suggests that understanding the reasons for institutional variety within capitalism requires incorporating the work of Cambridge Keynesians which recovered the work of Classical political economy authors and extended Keynes’s ideas on effective demand to explain the process of accumulation. It also requires incorporating the ideas of Prebisch and the Latin American Structuralists, who analysed the limits to accumulation in peripheral countries. The paper also discusses the limitations of Neo-Kaleckian models of demand-led growth used by some authors in the comparative political economy literature, and it suggests a new taxonomy for ordering varieties of capitalism.

This is a brief introduction to the special issue on “New Developments in Modelling and Estimation of Economic Cycles” . The concept and definition of economic and business cycles are discussed together with two main schools of thought, the Keynesian and the neoclassical. Until the Keynesian revolution in mainstream economics in the wake of the Great Depression, classical and neoclassical explanations were the mainstream explanation of economic cycles; following the Keynesian revolution, neoclassical macroeconomics was largely rejected. There has been some resurgence of neoclassical approaches in the form of real business cycle (RBC) theory. Real business cycle theory is a class of macroeconomic model in which business cycle fluctuations to a large extent can be accounted for by real (in contrast to nominal) shocks. In a broad sense , there have been two ways by which economic and business cycles have been studied, one analyzing complete cycles and the other, studying the behavior of the economic indicators during incomplete phases by comparing current contractions or expansions whith corresponding phases in the past in order to assess current economic conditions. Two different methodologies have been applied for current economic analysis, the parametric one, that makes use of filters based on models, such as ARIMA and State Space models , and the other based on nonparametric digital filtering. Some of the invited papers of this issue deal with this second approach.

Abstract The two most basic non-metaphysical materials used by economists to erect their theoretical structures are prices and quantifies. Two visions of reality are contrasted: (a) that in which historical price determination is explained without reference to demand (Sraffa), and (b) that in which the determination of quantities in historical time is explained without explicit reference to supply (Keynes). In the neoclassical vision of reality, prices and quantities are simultaneously determined by both demand and supply in logical time. It is then argued that the "post-keynesian" appellation is misleading. What is needed is a truly post-classical approach based on the works of Keynes, Sraffa and Marx.

Michael Woodford's Interest and Prices: Foundations of a Theory of Monetary Policy (2003) is an important book. Woodford's title is, of course, a conscious revival of Wicksell's own famous work and it points to an effort to recast the analysis of monetary policy as centered on interest rates. I believe that Woodford's theoretical orientation is essentially correct. In repairing to Wicksell, he places the monetary aggregates into a more reasonable perspective, correcting the distortions of the monetarist and Keynesian diversions with respect to money. My money is, so to speak, where my mouth is: My own textbook-in-progress is also based around an IS/interest-rate rule/AS model, in which financial markets cleared by price rather than the LM curve are emphasized. Such an approach, as Woodford notes, has become standard in central banks, but has not yet captured either core undergraduate or graduate textbooks and instruction. My task here, however, was not to praise Woodford's economics nor to trace or evaluate its Wicksellian routes, but to consider Interest and Prices from a methodological point of view.

This paper attempts to analyse and describe the role played by a state in promoting economic growth by contrasting two classical schools of political economy, the Keynesian school of thought and Neo-liberalism. The British economist, John Maynard Keynes proposed optimising market practices under a technocratic system of governance. In recent decades, this influential approach has exposed its vulnerabilities to the revival of neo-liberal laissez-faire arguments. In the age of globalisation, the integration of economies around the world has put new demands on the modern state at the very same time, in many ways, which have reduced their capacities to deal with those demands. The state today is squeezed, on the one side, by the forces of global economy and, on the other side, by the political demands for devolution of power. There is an important role for the state to play in the economic development, whether it is through intervention or deregulation, the ultimate choice lies with the society regarding which of the two forms to follow. In some dramatic role reversals, the yesteryear champions of laissez-faire (the US and UK) are moving towards protectionism, whereas, the earlier advocates (China and Russia) of closed economies are today arguing the case of free and fair international trade and globalisation per se. This is no coincidence as, ironically, both the school of thoughts have a lot in common in that they complement each other in many ways in terms of intellectual ideology.

Purpose The purpose of this paper is to investigate whether there is room for a stabilising fiscal policy, through an analysis of the supporters of the new classical economics and the supporters of the new Keynesian economics. There are no reliable results on the Keynesian and non-Keynesian effects of fiscal policies. As such, the policy-mix becomes a problem of theoretical approach, in the sense of a strategic game between monetary authorities and tax authorities (among them). This points to the problem of coordination between budgetary authorities as being the central debate within the Eurozone. The end-result is that without fiscal policy coordination, Eurozone member states are working on a series of non-cooperative games that are inefficient, because no player can improve its position by unilaterally changing its strategy. Design/methodology/approach The analysis starts from the experience of three countries in the 1980s, these are Denmark, Ireland and Sweden. In all three cases the adoption of restrictive budget policies has provoked a strong, rapid and enduring resizing of public debt, and growth did not weaken, moreover it accelerated. In all three cases the logic behind the policy-mix actions allowed the individualisation of the respective roles of fiscal and monetary policies. Fiscal policies were joining with fiscal instruments and reduction in public spending and furthermore monetary policy was accommodated in respect of the budget contraction. Findings First, the authors were not able to identify an analytical method that can ensure the success of a fiscal policy. Second, analysing fiscal policies within the Eurozone implies also that the authors reflect on the need for a coordination of these policies. In fact, the authors have shown how the possible coordination of economic policies in the Eurozone would result in major benefits for all member countries. Originality/value In the absence of fiscal policy coordination, member states are engaged in a series of non-cooperative games that prove inefficient, when no player is able to improve its position by unilaterally changing its fiscal policy. The coordination of national fiscal policies generates a collective advantage, bringing each state to consistently change its strategies.

The rational expectations revolution was not based only on the introduction of Muth’s idea of rational expectations to macroeconomics; this introduction alone cannot explain the more drastic changes to the mathematical toolbox, concepts, and research strategies since the 1980s. The shift from “Keynesian economics” to “new classical economics” is based on a shift from a control engineering approach to an information engineering methodology. This “revolution” was even more radical; it also changed the epistemology and ontology of macroeconomics. The ontology of information engineering, and hence of new classical economics, is a world populated by machines that communicate by the exchange of noisy information. The decisions these machines make are conditioned on the (noisy) information they have about the current state of the world but which at the same time will affect future states. Policy in this world therefore means tracing an optimal trajectory taking all these issues into account. To show this shift in epistemology and ontology, the history of economics is interwoven with the history of mathematics, which cannot be detangled from the emergence of the digital computer. The computer changed the nature of mathematics in a specific way by adopting a new concept of solution, namely the algorithm.

The New Neoclassical Synthesis that Michael Woodford puts forward in his Interest and Prices (2003) is primarily a synthesis of New Classical and New Keynesian ideas. Yet Woodford presents it as an encompassing approach that goes much further back in time to integrate the pre-Keynesian macroeconomics of Knut Wickseil and his followers. Starting with the title, the book contains many references to Geldzins und Güterpreise (1898), Wicksell's landmark contribution to monetary theory which was translated as Interest and Prices in 1936. Woodford relates his concept of a “monetary policy without money” to Wicksell's concept of the pure credit system and to Wicksell's proposal to eliminate inflation by adjusting nominal interest rates to changes in the price level—an idea that has much in common with modern policy rules à la Taylor. He presents the core model of the new synthesis (in shorthand: IS + AS + Taylor rule) as a “neo-Wicksellian framework” that serves to analyze the dynamics of interest-rate gaps and output gaps (2003, chapter 4). Referring to the Wicksellians of the 1920s and 1930s (primarily Erik Lindahl, Gunnar Myrdal, and Friedrich A. Hayek), Woodford grounds his advocacy of rules to fight inflation on the potential non-neutrality of monetary policy: “[I]t is because instability of the general level of prices causes substantial real distortions—leading to inefficient variation both in aggregate employment and output and in the sectoral composition of economic activity—that price stability is important” (2003, p. 5). He thus sees his analysis of interest-rate and output gaps as “an attempt to resurrect a view” that the old Wicksellians had developed in their analyses of cumulative processes.

Empirical study of “twin deficits” for the case of Senegal. This article is concerned with the verification of the Ricardian neutrality hypothesis in Sénégal, by the existence or not of the phenomenon of “twin deficits”. The objective of this work was to study the correlation between the budget deficit and the current account deficit. The review of the theoretical literature focuses on Ricardian and conventional (classical and Keynesian) equivalence approaches dealing with the effects of public debt on the real economy. The review of the empirical literature made it possible to review certain applications by country or panel data to confirm or refute the hypothesis of neutrality by verifying the existence or not of the phenomenon of twin deficits. Thus, the methodological approach that we adopted is the cointegration test of the two variables through the use of the error correction model (ERM) according to the method of Engle and Granger (1987). Our results indicate an absence of cointegration between the budget deficit and current account balance variables and therefore an equilibrium relationship over the period studied, between these two variables, hence acceptance of the Ricardian Equivalence Proposal for the period 1991–2020. Also, this result is identified with the verification of the Ricardian Equivalence Proposal (PER) for Sénégal.

Money supply in developing countries, like Pakistan plays an important role. According to classical theory, supply creates its own demand. Any increase in money supply will give rise to increase in prices only but the effect on output will remain unchanged. The Keynesians argue that aggregate demand determines output, therefore, fiscal policy is more important. The monetarists on the other hand, argue that in the short run money and only money matters. In the case of the rational expectation approach, anticipated changes in money supply are neutral but short-run unanticipated changes in money supply have a role in determining the growth of output. Monetary policy is an effective instrument in the hands of government to obtain the desired targets such as level of output, unemployment, and prices. Therefore, it is very important to know whether changes in money supply cause changes in output or vice versa. In other words, we have to identify the direction of the causality. If both variables are serially correlated with each other then we cannot use any of them as a determinant of the other.

Purpose – The purpose of this paper is to contribute to a discourse analytical understanding of the political economy. The term “crisis” is an important label in recent discussion in political economy. Yet the genuine discursive dimension of “the crisis” and the multiple linguistic layers of the crisis discourse remains an open issue. Design/methodology/approach – Realist perspectives usually believe in an external reality of crises independent of the language construction; in contrast, constructivist perspectives argue that a crisis is always the result of a socio-linguistic construction process. This contribution follows a critical-constructivist perspective, thereby taking into account powerful discursive actors which are able to “declare” a state in the world as a “crisis”. Findings – From a discourse analytical point of view, this paper examines the rules and logics of crisis management policy, arguing that a new politico-academic elite has appeared which is beyond the classical distinction between “Keynesians” and “neo-liberals”. By taking a position in the discourse of the recent debate on financial regulation, these new elite might be able to manage the crisis for a particular time, as they are constructed as “moderating actors” through academic and political discourses. Research limitations/implications – From a practical point of view, this analysis cannot offer economic solutions; from an analytical viewpoint, it will not give insights into discursive contexts. Practical implications – This analysis helps to understand current debates on economic policy and to improve the communicative efficiency of the participants. Originality/value – This paper combines a discourse analysis with a governmentality perspective and applies this analytical tool onto a political and economic topic currently prevailing in the global political economy.

The relevance of the study is underpinned by continuing sharp scientific and practical discussion on the evolution of economic science aimed at obtaining exhaustive answers to such questions as: “What is orthodoxy in economic science? Why is it that the theoretical and methodological orthodoxy that accompanies the emergence and transformation of alternative directions of world economic thought cannot be overcome not only in the past but also at the present time? What is the historical significance of a retrospective analysis of vectors, stages and problems of the formation of unorthodox foundations in the development of this branch of human knowledge? and others. The findings of prominent Russian and foreign scientists-economists, allowing to reveal and comprehend the diverse methodological and theoretical components of orthodoxy in the past and present set the subject of this review article. The purpose of the study is to consider, systematize and generalize the evidentiary warnings published in the works of prominent modern researchers about the urgent need to overcome the negative consequences of orthodox maxims, which, having been absolutized since the time of the “fathers of political economy”, continue to manifest themselves to this day. The key research methods include systematic approach, evolutionary and cross-industry analysis. The results of the review incorporate conclusions and evidence that make it possible to unbiasedly comprehend the key scientific and practical problems for the fate of this science in the past and present. In particular, the author’s position is argued that the examples of postulating judgments about the presence and coexistence of “Western-non-Western”, “bourgeoisnon- bourgeois” economic science, which are still found in Russian economic literature, are based solely on the classformational research approach and therefore are completely untenable. It has been proved that from its “ancestors” and “fathers” of economics, i. e. adherents mercantilism and classical political economy principles to modern economists (from institutionalists to Keynesians and neoliberals) the existing palette of orthodox theoretical and methodological innovations accompanying the development of economic science explicitly or implicitly along with its commitment to the class analytical approach are due to a certain subtext of the absolutization of “objective economic laws”.

Abstract: Mainstream economics is in crisis. Both in the Keynesian revolution (which emerged in response to the crisis in the Classical approach) and in the neoclassical counterrevolution (spurred from failures of Keynesianism), there have been significant contributions to the study of the relationships known as the Phillips curve. This paper advances an Austrian approach, rooted particularly in the writings of Friedrich Hayek, to the study of the Phillips curve. The relative superiority of the Austrian approach to account for the current crisis, within the study of the Phillips curve, is analyzed. Only a positive slope of a Phillips Curve can explain this massive destruction of employment all over the world. Key words: Phillips curve, inflation, unemployment, business cycles, crisis of 2008. JEL Classification: B25; E24; E32; E58; N12. Resumen: El paradigma dominante está en crisis. Tanto en la revolución keynesiana (que surge como respuesta a la crisis del enfoque clásico), como en la contrarrevolución neoclásica (que emerge como resultante de la crisis del keynesianismo), han habido aportes significativos en el estudio de la Curva de Phillips. Aquí proponemos un enfoque alternativo al neoclásico, basado en la tradición de la Escuela Austriaca —y en particular en los escritos de Friedrich A. Hayek—. La relevancia del estudio se observa en la utilidad para comprender los acontecimientos de la crisis actual. Sólo una Curva de Phillips de pendiente positiva puede explicar esta destrucción masiva de empleo en todo el mundo. Palabras clave: Curva de Phillips, inflación, desempleo, ciclos económicos, crisis de 2008. Clasificación JEL: B25; E24; E32; E58; N12.

AbstractAs well interventionist as ordo-liberal strategies have a long tradition in German economic policy. Interventionism is not only supported by Keynesian economics but also by the neo-classical approach. In contrast to the common view in neo-classical mainstream - as comparative-static analysis method - in this paper scientific isolation of economic phenomenon will be rejected. The economic system is very complex. Therefore economists have to discuss appropriate methods to analyse economic policy strategies.In this paper the problem of complexity in society in common and in economics strictly is discussed. It can be shown that complexity and nonlinearity are main characteristics of dynamic economic processes. An additional problem - resulting from the characteristic of complexity - is the existence of a constitutional lack of knowledge. No one in society, neither a scientist nor an economic policy maker, is able to collect all the necessary knowledge. Therefore interventionist strategies in economic policy are weaker than ordo-liberal ones. Because of the necessity of adaptation-flexibility in dynamic economic systems an “Evolutionary Economic Policy”, characterised by ordo-liberal insights in the importance of economic and political order and evolutionary views on economic processes as discovery procedures, are advocated.But why interventionist strategies are so successful in economic policy - not only in Germany? By using a neo-classical model of institutional competition, including transaction costs etc, the dominant position of interventionist strategies cannot be explained. Therefore in this paper an analysis, basing on systems theory and the ordo-liberal idea of interdependencies of orders, is used to show the complexity in real society according to the choice of strategies in economic policy. It can be shown that dependencies with the political subsystem are mostly important for this dominant position of interventionist strategies. As Hayek predicted a long time ago, a rise of the welfare state occurred in the western world. But interventionist policies are also supported by the formation of a mainstream in economics, dominated by the neo-classical theory, and by cultural factors, by internal institutions and path-dependency.The result of this analysis is a paradox: Complexity in society and especially in economics requires ordo-liberal strategies in economic policy. But at the same time the existence of complexity in society is main argument for the problems relative to the introduction of such strategies, which are more adaptive and thereby more useful in economic policy. Hopefully nowadays by the pressure of international institutional competition, called “globalisation”, ordo-liberal and evolutionary strategies will be supported more.

Purpose- Governments and Central Banks are critical actors in avoiding big swings like recessions, destabilizing inflations, or stagflations. On top of that, they might interact with different tools and resources to realize their own macro-financial purposes and interests. They engage in concrete macro-financial processes to reshape monetary regimes. Indeed, in the aftermath of the Global Financial Crisis (GFC) of 2008, major central banks held interest rates at zero or in a negative zone, yet global inflation remained low anyway. Though, as stated by Bernanke, this instrumental flexibility prevented a total meltdown in the world (Bernanke 2013, 87), where the experience of the post-GFC period until the post-COVID era (2021) has shown, how rigid implementation of this “meta-power” solely for the sake of “inflation or not” objective may result in “outside-the-box surprises”. Therefore, we must understand within which the internal actors (central banks) of an econofinancial system and the contours of “outsiders” who influences central bank policies on the non-technocratic political fronts. Now, a moment of awakening is on the way as global inflation has surged out of this box to a 9.8% level pushing the strongest economies in the world to the limits of a deflationary spiral, if not to stagflation. Our paper will argue that great regime changes and policy reversals on the monetary and fiscal policy fronts are on the way at the post-COVID era. In this regard, “Tight Fiscal and Loose Monetary Policies” are replaced with “Loose Fiscal and Tight Monetary Policies” at the new regime. To this end, our paper aims to analyze those regime shift processes within the macro-financial neoclassical and Keynesian synthesis of “regime switching”. Notwithstanding with this primary objective, the paper sheds light on the quasi “tug-of-war” (Economist October 8th, 2022) between the governmental- and central banker actors under the framework of Actor Oriented System Dynamics Theory (ASD), which is used to model socio-economic systems and phenomena. Consequently, we will try to make educated guesses about the possible effects on the financial system resilience, where the financial system will be in need of to redesign their playing rules and strategies within these new meta-power rules. Methodology- The macro-financial analysis of regime change processes will rely on the current trend to combine historical Classical and Keynesian approaches. This synthesis depends on the assumption of stationary equilibrium in the Keynesian approach. The switch from the Keynesian regime to the Classical one would be depicted within the IS-LM models, resulting in Inflation and Stagnation. This result is in line with our predictive findings, as explained below. Didactically, this macro theoretical approach will be strengthened by relying on the Actor Systems Dynamics Theory. It should be stressed from the outset that the Keynesian or Classical framework took certain institutional power dynamics and games for granted. In this regard, part II will explore a new paradigm that is needed to provide an adequate model to understand the “fiscal dominance versus independence” phenomena, whereby governments as “recession fighters” put political pressure on their central banks to keep interest or borrowing costs low and the will of central bankers for institutional independence to exercise their other missions. Understanding the macro-financial problems today requires a transdisciplinary paradigm and the reconceptualization of “independence” (Conti-Brown, 6). The interaction of the new regime of “Stagflation” with the financial system on the “Financial System Resilience” front will be elaborated within the models related to systemic risk modelling approaches such as RAMSI-style structural models of systemic risk and DSGE models for financial stability policy, which are summoned under the heading of “Network Model of Financial System Resilience”. Findings- Within the context and framework of ASD theory, the collision between the Governments and Central Banks will result in the new games that were once characterized by expansionary monetary and fiscal policy, resulting in record low-interest rates and Inflation (Asset Price and Consumer Products) will change to less expansionary monetary policy combined with a still expansionary fiscal policy. This new art of policy collisions will increase interest rates, control inflation, and decline in asset prices. If the interest rate hikes worsen the debt-to-GDP ratios and the central banks would prefer to fight against inflation by selling assets like government bonds, central banks, including private and public banks, would suffer from capital losses on the bond sales and their insolvency combined with the need for extra capital would erode further confidence within a macro-financial system. This would again push for higher rate hikes that would also increase the borrowing costs for the Treasuries and the corporates, no matter how they would enforce repressive measures to push down the borrowing costs. Facing a new fiscal deficit burden on the front as new defence, health care and ESG issues are pressing the governments, “rating weak” countries would face a risk of sovereign downgrades as well. Under the shadow of fundamental trends like zero-emission and decarbonization policies, increasing defense and energy spending, aging populations, and higher healthcare costs, there will be great spending governments, and the world will return to the second version of the 1970s with rampant and persistent patterns of macroeconomic shocks giving possible ways to corporate defaults, credit losses for banks and financial system resilience risks. To stop any market or systemic failure due to the contracting real balances and liquidity within the econo-financial systems, Governments and Central Banks might return to an older kind of financial repression through regulations. This will result in more losses of independence, not just of the Central Banks combined with state-owned banks; the remaining private sector banks will be in a different game context within the borders of ASD Theory. Consequently, all of those actors will find themselves in a zero-sum-game. Conclusion- One of the major macro conclusions is the fact that the FED and the other central banks cannot fight against inflation while massive amounts of cash are burned by the fiscal policy implementors within the macro-financial system. This is the point where monetary policy-based solutions cannot be taken for granted. In infected money and capital markets in the post-COVID era, we observe an “Illusion of Control” and strive for more recognition by the governments. The Central Bank authorities and governmental fiscal agencies would think that everything would be under “control” even though the markets were showing higher volatilities and governments were pressing for more asset values. Contrary to the fundamental macroeconomic theories where central banks would stimulate the markets by exercising macro-prudential instruments, corporates would rest and slow down their investment activities during higher volatility and interest rates hikes; the corporates would further find themselves in a more stochastic investment-financing processes with higher volumes of disinvestment or default processes, whereas the political elite would try to reverse this process by injecting more governmental deficit into the society. Consequently, unfavourable shocks under the new regime can trigger unwinding of the intended credit cycles with dramatic default and sizable scales of new debts, which should be monetised by the central banks at higher inflationary costs. Consequently, the results of the aggregate loss distributions modelled by systemic risk measurement approaches within a financial system may address a forthcoming stagflation on the econofinancial horizon. Keywords: Behavioral finance, financial crisis, criteria for decision-making under risk and uncertainty, regime switching JEL Codes: D52, D81, D83, G11, G01

The monetary policy of the central bank of any state is designed to regulate the money supply through the use of many monetary instruments. The use of the discount rate, foreign exchange interventions, the reduction or increase of required bank reserves according to classical Keynesianism should influence the intertemporal choice of households. However, not all tools have the same effect on household choices and therefore studying the effectiveness of their use is relevant. The purpose of the article is to study the impact of the central bank's monetary policy on financial and investment activities of the population. Determining the effectiveness of monetary policy instruments used by central banks through the prism of the new Keynesian school. The following scientific methods were used during the research: analysis and synthesis, deductive method, analogy method, modeling, system approach, abstraction method. Monetary policy of central banks affects the economy. Changes in the discount rate increase the number of loans and deposits, change interest rates in the loan capital market. In the long run, this affects the dynamics and growth rates of loans and deposits. However, household income and consumption levels have a significant impact on household decisions about current and future consumption, intensification or, conversely, reduction of financial and investment activities. Reducing the discount rate to 6% did not lead to an increase in retail deposits and the number of securities. It is established that the decrease in inflation did not lead to an increase in incomes and consumption of goods and services. Financial activity is most affected by income levels and wealth. The impact of monetary instruments on households is adjusted and even often offset by «sticky prices», «sticky wages», «sticky information» and income heterogeneity in the structure of households. According to the study, the reduction of the discount rate did not affect the increase in deposits and savings in securities of the population. Therefore, when formulating monetary policy, the NBU should also take into account the relationship with income and wages, between liquid and illiquid assets, the marginal propensity to consume with low incomes, taking into account the intermediate choice, «sticky prices», «sticky wages» and «sticky information».

Purpose of this study: In the aggregate industrial sector, government intervention to influence demand within the economy is generally counterproductive, while the optimal policy is to concentrate on supply-side reforms that help the economy become efficient. The objective of this study was to construct a unique industry cycle indicator for Bangladeshi aggregate firms within this industrial sector. The specific objectives were to assemble a unique industry cycle indicator which recommends early signals of a firm’s industrial vulnerability, identify industry cycle indicator turning points and evaluate the predictive performance of the industry. The industry cycle indicator model demonstrates the macroeconomic fluctuations in the industrial sector. Methodology: The industry cycle indicator was constructed following the approach of the Conference Board (2000). The result wasthen tested for robustness with a macro-stress test. Lagged independent variables were used in this study to allow early predictions by the ICI for the year in which the financial crisis happened. Main Findings: The industry cycle indicator model underplays the role of aggregate industrial efficiency in influencing the economic cycle. By forecasting directional changes, this leading indicator allows policymakers to be made aware of revolutions in the financial industry and to undertake early precautionary steps to prevent vulnerability. Here, the constructed industry cycle indicator demonstrates a remarkable lead time of around 6 months for predictions and outperforms by the leading against the reference series. Research Limitations/Implications: The industry cycle indicator model rejects the Keynesian approach and also rejects monetarism. It tends to be associated with neo-classical economics. The ICI generally assumes that shocks to productivity lead to economic fluctuations. In other words, a temporary fall in output is an inevitable consequence of a drop in productivity within the industrial sector. It also leads to adjustments to this new equilibrium and enables resources to discover more productive uses. Novelty/Originality: This research demonstrates that enhanced knowledge of components of the macro-prudential policy framework combined with the existence of a certain degree of standardisation of the macro-prudential tools and indicators is essential. This can significantly develop the capability of the financial markets supervisory authorities to forecast systemic risk and to avoid or reduce the consequences of industrial crises. The present study reflects a situation for upcoming researchers who intend to study and develop their interests in this area.

PurposeThis paper analyzes the potential presence of time-varying asymmetries in the preference parameters of the Central Bank of Brazil during the inflation targeting regime.Design/methodology/approachGiven the econometric issues inherent to classical time-varying parameter (TVP) regressions, a Bayesian estimation procedure is implemented in order to provide more robust parameter estimates. A stochastic volatility specification is also included to take into account the potential presence of conditional heteroskedasticity.FindingsThe obtained results show that the reduced form and structural parameters were not constant during the period considered. Moreover, the subsequent analysis of the preference parameters provided evidences of short periods in which asymmetry was an important feature to the conduction of monetary policy in Brazil. Yet, during most of the sample period, the loss function was considered to be symmetrical.Originality/valueThis paper aims to contribute to the rather scarce monetary debate on time-varying central bank preferences. The study of Lopes and Aragón (2014) is, to the best of the authors’ knowledge, the only study for Brazil considering specifically TVPs. The authors applied Kalman filter estimation to data from 2000:M1 to 2011:M12. Despite the similar structure of TVPs, the present paper extends the latter study by controlling for stochastic volatility. Ignoring conditional heteroskedasticity might lead to spurious movements in time-varying variables and inaccurate inference (Hamilton, 2010). Thus, the stochastic volatility specification is included to take this issue into account. The authors follow the theoretical scheme put forward by Surico (2007) and Aragón and Portugal (2010), in which the economy is modeled from a New Keynesian perspective and the central bank loss function is assumed to be asymmetric regarding the responses to inflation and output deviations from their targets. On the empirical side, the authors propose a TVP univariate regression with stochastic volatility for the Brazilian reduced-form reaction function, following closely the Bayesian econometric procedure developed by Nakajima (2011). Given the nonlinear non-Gaussian nature of the TVP regression with stochastic volatility, the choice of a nonlinear Bayesian approach using the Markov chain Monte Carlo (MCMC) method is justified due to the intractability of the associated likelihood function (Primiceri, 2005). Finally, based on the theoretical model specification, the authors intend to recover the central bank preference parameters as to further evaluate the degree of asymmetry and its potential time-variation under the inflation targeting regime.