Levy Institute Publications

                          • Greece’s Economy after COVID-19

                            Strategic Analysis, May 2020 | May 2020 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro Zezza
                            Greece’s fragile economic recovery was halted by the COVID-19 pandemic: GDP, employment, exports, and investment are expected to record significantly negative trends. While some projections for GDP growth show a quick V-shaped recovery beginning in 2021, this is rather improbable given the Greek economy’s structural inefficiencies.
                            This strategic analysis explores the consequences of various assumptions about the fall in the different sources of aggregate demand in order to produce a baseline projection for the Greek economy. A more optimistic scenario is also analyzed, in which the European Commission’s recently announced Recovery Fund materializes, allowing the government to increase public consumption as well as investment through EU grants and loans. The authors recommend additional measures to alleviate the impact of the shock and help put Greece’s economy back on track when the epidemic has died out.

                          • Prospects and Challenges for the US Economy

                            Strategic Analysis, January 2020 | January 2020 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro Zezza
                            2020 and Beyond
                            This Strategic Analysis examines the US economy’s prospects for 2020–23 and the risks that lie ahead. The baseline projection generated by the Levy Institute’s stock-flow consistent macroeconomic model shows that, given current fiscal arrangements and the slowdown in the global economy, the pace of the US recovery will slacken somewhat, with a growth rate that will average 1.5 percent over the next several years.

                            The authors then point to three factors that can derail this already weak baseline trajectory: (1) an overvalued stock market; (2) evidence that the corporate sector’s balance sheets are more fragile than they have ever been in the postwar period; and (3) risks in the foreign sector stemming from the slowdown of the global economy, an overvalued dollar, and the current administration’s erratic trade policy.

                          • Pandemic of Inequality

                            Public Policy Brief No. 149, 2020 | April 2020 | Luiza Nassif Pires, Laura de Lima Xavier, Thomas Masterson, Michalis Nikiforos, Fernando Rios-Avila
                            The costs of the COVID-19 pandemic—in terms of both the health risks and economic burdens—will be borne disproportionately by the most vulnerable segments of US society. In this public policy brief, Luiza Nassif-Pires, Laura de Lima Xavier, Thomas Masterson, Michalis Nikiforos, and Fernando Rios-Avila demonstrate that the COVID-19 crisis is likely to widen already-worrisome levels of income, racial, and gender inequality in the United States. Minority and low-income populations are more likely to develop severe infections that can lead to hospitalization and death due to COVID-19; they are also more likely to experience job losses and declines in their well-being.

                            The authors argue that our policy response to the COVID-19 crisis must target these unequally shared burdens—and that a failure to mitigate the regressive impact of the crisis will not only be unjust, it will prolong the pandemic and undermine any ensuing economic recovery efforts. As the authors note, we are in danger of falling victim to a vicious cycle: the pandemic and economic lockdown will worsen inequality; and these inequalities exacerbate the spread of the virus, not to mention further weaken the structure of the US economy.

                          • Guaranteeing Employment during the Pandemic and Beyond

                            Policy Note 2020/4 | May 2020 | Pavlina R. Tcherneva
                            The ongoing job losses, already numbering in the tens of millions, and the mass unemployment that will remain once the COVID-19 crisis has passed are of our own making, argues Pavlina R. Tcherneva, created by our inability to conceive of policies that protect and create jobs on demand. There is another option: instead of capitulating to a world of guaranteed unemployment, we can demand policies that guarantee employment. During the pandemic, the government can protect jobs by acting as a kind of employer of last resort, while in the post-pandemic world it can create jobs directly via mass mobilization and a job guarantee. In this environment, backstopping payrolls, mass mobilization, and the job guarantee are three different but organically linked policies that aim to secure the right to decent, useful, and remunerative employment opportunities for all.

                          • Immigration Policy Undermines the US Pandemic Response

                            Policy Note 2020/3 | April 2020 | Martha Tepepa
                            Research Scholar Martha Tepepa explains how the US response to the COVID-19 crisis will be hindered by its approach to immigration policy. The administration’s “zero tolerance” immigration campaign creates a public health risk in the context of this pandemic, and the recent implementation of the “Inadmissibility on Public Charge Grounds” final rule penalizing noncitizen recipients of some social services will further restrict access to treatment and encumber the fight against the coronavirus.

                          • Statement of Senior Scholar L. Randall Wray to the House Budget Committee, US House of Representatives

                            Testimony, November 20, 2019 | November 2019 | L. Randall Wray, Yeva Nersisyan
                            Reexamining the Economic Costs of Debt
                            On November 20, 2019, Senior Scholar L. Randall Wray testified before the House Committee on the Budget on the topic of reexamining the economic costs of debt:

                            "In recent months a new approach to national government budgets, deficits, and debts—Modern Money Theory (MMT)—has been the subject of discussion and controversy. [. . .]

                            In this testimony I do not want to rehash the theoretical foundations of MMT. Instead I will highlight empirical facts with the goal of explaining the causes and consequences of the intransigent federal budget deficits and the growing national government debt. I hope that developing an understanding of the dynamics involved will make the topic of deficits and debt less daunting. I will conclude by summarizing the MMT views on this topic, hoping to set the record straight."

                            Update 1/7/2020: In an appendix, L. Randall Wray responds to a Question for the Record submitted by Rep. Ilhan Omar

                          • Public Service Employment

                            Research Project Report, April 2018 | April 2018 | L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, Stephanie A. Kelton
                            A Path to Full Employment
                            Despite reports of a healthy US labor market, millions of Americans remain unemployed and underemployed, or have simply given up looking for work. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton examine the impact of a new “job guarantee” proposal that would seek to eliminate involuntary unemployment by directly creating jobs in the communities where they are needed.
                            The authors propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour and offer a basic package of benefits. This report simulates the economic impact over a ten-year period of implementing the PSE program beginning in 2018Q1.
                            Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.

                          • Can We Afford the Green New Deal?

                            Public Policy Brief No. 148, 2020 | January 2020 | Yeva Nersisyan , L. Randall Wray
                            In this policy brief, Yeva Nersisyan and Senior Scholar L. Randall Wray argue that assessing the “affordability” of the Green New Deal is a question of whether there are suitable and sufficient real resources than can be mobilized to implement this ambitious approach to climate policy. Only after a careful resource accounting can we address the question of whether taxes and other means might be needed to reduce private spending to avoid inflation as the Green New Deal is phased in.
                            Nersisyan and Wray provide a first attempt at resource budgeting for the Green New Deal, weighing available resources—including potential excess capacity and resources that can be shifted away from existing production—against what will be needed to implement the major elements of this plan to fight climate change and ensure a just transition to a more sustainable economic model.

                          • Macroeconomic and Microeconomic Impacts of Improving Physical and Social Infrastructure

                            Research Project Report, September 2019 | September 2019 | Ajit Zacharias, Thomas Masterson, Fernando Rios-Avila, Michalis Nikiforos, Kijong Kim, Tamar Khitarishvili
                            A Macro-Micro Policy Model for Ghana and Tanzania
                            Feminist economics has long emphasized the role of physical and social infrastructure as determinants of the time women spend on household production (the provision of unpaid domestic services and care). Surprisingly, there is a lack of studies that directly investigate how infrastructure improvements affect the time spent on household production and commuting to work, which is another important unpaid activity for most employed individuals. We attempt to fill the lacunae in the research by studying this issue in the context of Ghana and Tanzania utilizing the framework of the Levy Institute Measure of Time and Income Poverty. Separately, while there are several studies (including those done previously at the Levy Institute) on the macroeconomic impacts of government expenditures on care, these assessments tend to be based primarily on employment multipliers along with simple macroeconomic assumptions. We develop a disaggregated and fully articulated macroeconomic model based on the social accounting matrices for the two countries to take account of the intersectoral linkages and external constraints, such as balance of payments, that are particularly important for many developing nations, including Ghana and Tanzania. The macro- and microeconomic aspects are integrated in a unified analytical framework via a top-down disaggregated macroeconomic model with microsimulation that is novel in that it enables the investigation of the gendered economic processes and outcomes at the macroeconomic and microeconomic levels.

                          • The Macroeconomic Effects of Student Debt Cancellation

                            Research Project Report, February 2018 | February 2018 | Scott Fullwiler, Stephanie A. Kelton, Catherine Ruetschlin, Marshall Steinbaum
                            Among the more ambitious policies that have been proposed to address the problem of escalating student loan debt are various forms of debt cancellation. In this report, Scott Fullwiler, Research Associate Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum examine the likely macroeconomic impacts of a one-time, federally funded cancellation of all outstanding student debt.

                            The report analyzes households’ mounting reliance on debt to finance higher education, including the distributive implications of student debt and debt cancellation; describes the financial mechanics required to carry out the cancellation of debt held by the Department of Education (which makes up the vast majority of student loans outstanding) as well as privately owned student debt; and uses two macroeconometric models to provide a plausible range for the likely impacts of student debt cancellation on key economic variables over a 10-year horizon.

                            The authors find that cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve). These results suggest that policies like student debt cancellation can be a viable part of a needed reorientation of US higher education policy.

                          • Are We All MMTers Now? Not so Fast

                            One-Pager No. 63 | April 2020 | Yeva Nersisyan , L. Randall Wray
                            As governments around the world explore ambitious approaches to fiscal and monetary policy in their responses to the COVID-19 crisis, Modern Money Theory (MMT) has been thrust into the spotlight once again. Unfortunately, many of those invoking the theory have misrepresented its central tenets, according Yeva Nersisyan and L. Randall Wray.

                            MMT provides an analysis of fiscal and monetary policy applicable to national governments with sovereign, nonconvertible currencies. In the context of articulating the elements of that analysis, Nersisyan and Wray draw out one of the lessons to be learned from the pandemic and its policy responses: that the government’s ability to run deficits is not limited to times of crisis; that we must build up our supplies, infrastructure, and institutions in normal times, and not wait for the next crisis to live up to our means.

                          • The Economic Response to the Coronavirus Pandemic

                            One-Pager No. 62 | March 2020 | Yeva Nersisyan , L. Randall Wray
                            As the coronavirus (COVID-19) spreads across the United States, it has become clear that, in addition to the public health response (which has been far less than adequate), an economic response is needed. Yeva Nersisyan and Senior Scholar L. Randall Wray identify four steps that require immediate attention: (1) full coverage of medical costs associated with testing and treatment of COVID-19; (2) mandated paid sick leave and full coverage of associated costs; (3) debt relief for families; and (4) swift deployment of testing and treatment facilities to underserved communities.

                          • A Global Slowdown Will Test US Corporate Fragility

                            One-Pager No. 61 | March 2020 | Dimitri B. Papadimitriou, Michalis Nikiforos, Gennaro Zezza
                            The rapidly growing uncertainty about the potential global fallout from an emerging pandemic is occurring against a background in which there is evidence US corporate sector balance sheets are significantly overstretched, exhibiting a degree of fragility that, according to some measures, is unmatched in the postwar historical record. The US economy is vulnerable to a shock that could trigger a cascade of falling asset prices and private sector deleveraging, with severe consequences for both the real and financial sides of the economy.

                          • An Empirical Analysis of Long-Term Brazilian Interest Rates

                            Working Paper No. 956 | May 2020 | Tanweer Akram, Syed Al-Helal Uddin
                            This paper empirically models the dynamics of Brazilian government bond (BGB) yields based on monthly macroeconomic data in the context of the evolution of Brazil’s key macroeconomic variables. The results show that the current short-term interest rate has a decisive influence on BGBs’ long-term interest rates after controlling for various key macroeconomic variables, such as inflation and industrial production or economic activity. These findings support John Maynard Keynes’s claim that the central bank’s actions influence the long-term interest rate on government bonds mainly through the short-term interest rate. These findings have important policy implications for Brazil. This paper relates the findings of the estimated models to ongoing debates in fiscal and monetary policies.

                          • Class Size, Cognitive Abilities, Bullying, and Violent Behavior

                            Working Paper No. 955 | May 2020 | Sameh Hallaq
                            Evidence from West Bank Schools
                            This study uses rich administrative and survey data to investigate the effects of class size on students’ cognitive tests as well as bullying and violent behavior. I use the maximum class size rule to create a regression discontinuity (RD) relation between cohort enrollment size and class size in the public and the United Nations Relief and Works Agency (UNRWA) school system in the West Bank. In addition, I provide evidence that there is no violation of the RD assumptions resulting from discontinuities in the relationship between enrollment and students’ household background at cutoff points induced by a maximum class size rule. The main findings suggest that class size has no direct impact on students’ cognitive skills except for those in grade six. However, class size reduction improves the quality of life for children by mitigating the bullying and violent behavior among pupils that may negatively affect their achievements. Finally, I point to peer relations and mental health problems as a potential mechanism through which class size affects children’s self-reported bullying–victim instances and violent behavior.

                          • A Great Leap Forward

                            Book Series, January 2020 | January 2020 | L. Randall Wray
                            Heterodox Economic Policy for the 21st Century
                            A Great Leap Forward: Heterodox Economic Policy for the 21st Century investigates economic policy from a heterodox and progressive perspective. Author Randall Wray uses relatively short chapters arranged around several macroeconomic policy themes to present an integrated survey of progressive policy on topics of interest today that are likely to remain topics of interest for many years.

                            Published by: Elsevier Press
                          Ford-Levy Institute Projects
                          Levy Institute Publications in Greek

                          From the Press Room

                          Senior Scholar L. Randall Wray debated the Heritage Foundation's Stephen Moore at an April 22 event sponsored by CFA Society Chicago.

                          Senior Scholar L. Randall Wray debated the Heritage Foundation's Stephen Moore at an April 22 event sponsored by CFA Society Chicago.

                          Senior Scholar L. Randall Wray and Yeva Nersisyan pen an April 17 op-ed for <em>The Guardian</em>

                          Senior Scholar L. Randall Wray and Yeva Nersisyan pen an April 17 op-ed for The Guardian

                          Research Scholar Pavlina Tcherneva calls for direct investment in infrastructure and employment to stimulate economic recovery

                          Research Scholar Pavlina Tcherneva calls for direct investment in infrastructure and employment to stimulate economic recovery

                          Senior Scholar L. Randall Wray testified before the House Committee on the Budget, November 20

                          Senior Scholar L. Randall Wray testified before the House Committee on the Budget, November 20

                          OpEd: Don’t let politics derail Greece’s economic recovery

                          OpEd: Don’t let politics derail Greece’s economic recovery

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