During the last 10 years, the Levy Institute has published a series of papers on the evolving strategic predicaments facing the U.S. economy. Our work has never really taken hold in the United States, which may be a consequence of the unrepentantly Keynesian structure of our model, by which we continue to stand although it is not currently fashionable. But it may also be a result of the rather parochial attitude of many U.S. economists and institutions. In any event, it is high time we looked back on our endeavor and made an evaluation of it. Some repetition is unavoidable. Methods and Concepts Our assessments of the U.S. economy have not so far focused on short-term prospects, and this has distinguished our work from that of commentators whose evaluation is based on monthly and quarterly indicators. Up to now, we have concentrated on the medium term, trying to diagnose whether or not the configuration of "drivers"-the forces generating expansion or contractionwould be sustainable in the medium term, and hence whether the overall stance of fiscal and monetary policy was viable looking forward to a strategic time horizon, and what changes in policy, if any, should come under consideration. Looking back, we may have erred in not being more explicit about the model we use. 1 The following skeleton may be useful.
The author wishes to thank Philip Arestis for extensive and useful comments on earlier drafts and Steve Fazzari for helpful advice at the outset of the project. He thanks Kenneth Hannsgen and Greg Colman for comments on the second draft and Hannsgen for a calculation as indicated in a footnote below. These individuals are not responsible for any remaining errors. Is there any other way money might "matter," then, even when its quantity is endogenous? (see Arestis and Sawyer 2002, 2003a, 2003b) Many post-Keynesians of all stripes now follow Keynes's 1937 approach by allowing for a shortage of money (or finance) to constrain firms and consumers, perhaps when the monetary authorities refuse to accommodate money demand, when creditworthiness is in question, or in some other situation or combination of situations (for example, Davidson 2002, Ch. 7; Wolfson 1996). This acknowledgment seems intuitively sensible and consistent with survey evidence that bankers sometimes willfully tighten their lending standards. However, it reintroduces the notion that the quantity of money is partly determined by the central bank or commercial banks. Horizontalists are somewhat reluctant to concede this point to their critics, probably because it attenuates distinctions between heterodox and orthodox monetary theories and complicates the task of building models.
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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 1 Terms of use: Documents in ABSTRACTLongstanding speculation about the likelihood of a housing market collapse has given way in the past few months to consideration of just how far the housing market will fall and how much damage the debacle will inflict on the economy. In this paper, we discuss recent developments related to the housing market; econometrically assess the magnitude of the impact of housing price decreases on real private expenditure; assess the importance of new types of mortgages and mortgage-related securities; and briefly analyze possible policy responses.
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