Increased Policy Space under Globalization Rohit Azad and Anupam Das

[Working Paper No. 04/2012] A severe blow to active Keynesian policy intervention occurred as a result of the New Classical resurgence in macroeconomics. With a vertical aggregate supply curve in the short and the long runs (New Classicals) or at least in the long run (New Keynesians), it has been argued that the economy settles down at a unique non-accelerating inflation rate of unemployment (NAIRU) without any government intervention. Implicit in the NAIRU theory is that the prices can decrease just as they can increase. However, if the prices cannot decrease, the aggregate supply curve would be an inverse-L shaped…

Heterodox Central Bankers: Eccles, Prebisch and financial reform Matías Vernengo and Esteban Pérez Caldentey

[Working Paper No. 03/2012] The Great Depression led to a need to rethink the principles of central banking, as much as it had led to the rethinking of economics in general, with the Keynesian Revolution at the forefront of the theoretical changes. This paper suggests that the role of the monetary authority as a fiscal agent of government and the abandonment of the view of the economy as self-regulated were the central changes in central banking in the center. In the periphery, the change in central banking was related to insulating the worst effects of balance of payments crises, while…

An Essay on the Crisis of Capitalism – a la Marx? Korkut Erturk

[Working Paper No. 02/2012] The paper argues that a crisis of collective agency is at the root of the global economic crisis we face today. The secret of prosperous capitalism, the so-called golden age, was the ability of the state to uniformly impose welfare-enhancing market restrictions that made it possible to invest in common pool resources. This ability has waned during the neoliberal era and the result has been a resurgence of forces of competition – what Marx called the law of value – generating long-term collective costs that go increasingly unaddressed. This is reminiscent of classical capitalism's main weakness…

Fiscal Policy Evolution and Distributional Implications: The Indonesian experience Smitha Francis

[Working Paper No. 01/2012] This paper analyses Indonesia's resource mobilisation and public expenditure policies against the backdrop of her inequality trends and macroeconomic policy evolution. It is argued that the country's fiscal policy stance has been adversely impacted by her monetary and financial sector policies under an open capital account, with attendant regressive distributional implications. Juxtaposing the analysis of revenue mobilisation trends and taxation policies with the evidence of increasing asset and land concentration and persisting high inequalities reveals that the increase in income tax revenue did not necessarily come from the upper income profiles or corporate profits. Meanwhile, although…

Cash Transfers as a Strategy for Poverty Reduction: A critical assessment Policy Brief No. 03/2011

In the past decade, cash transfers have been gaining in popularity as a preferred strategy for poverty reduction in different parts of the world. This policy brief discusses some of the pros and cons of using cash transfers as a strategy for poverty reduction. It also discusses the need for seeing cash transfers as supplements, rather than as substitutes of public provisioning of goods and services. PB_03_2011 (Download the full text in PDF format)

Investment Provisions in Trade Agreements: Critical issues Policy Brief No. 02/2011

A prominent feature of recent trade and economic agreements is the inclusion of investment provisions, which involve profound public policy commitments. This policy brief focuses on some of the key aspects that developing country policymakers have to bear in mind while entering into investment negotiations. PB_02_2011 (Download the full text in PDF format)