Neither Austrian nor Post Keynesian school is part of contemporary economic mainstream, both schools explain business cycle theory by monetary influences. This thesis examinates, through analysis of these theories, whether there are any other common elements except of the fact that both are monetary theories of business cycle. The key question author tries to answer is if we can describe these theories as substitute or complement. In last part theoretical analysis is enriched by the scale, which reflects substitution or complementary nature of the theories.

Thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in the FACULTY OF COMMERCE LAW AND MANAGEMENT SCHOOL OF ECONOMICS AND BUSINESS SCIENCES at the UNIVERSITY OF THE WITWATERSRAND / The design and implementation of the monetary policy in South Africa has been based on the idea of a trade-off between inflation and output growth. However, there is no consensus among empirical investigations on the existence of Phillips curve in the present times. While the South African Reserve Bank (SARB) has instrument independence, it does not have goal independence, which implies that there is coordination between the monetary policy and other macroeconomic policies. Thus, if the SARB objectives are in line with the other policy objectives, there should be a relationship between monetary variables and real variables. This therefore shows that in the long-run, monetary policy cannot single-handedly bring about both sustained economic growth and employment creation (SARB, 2014). Thus this study explored inflation dynamics in South Africa by using the Hybrid new Keynesian Phillips curve (HNKPC) and the augmented Gordon’s models. The study firstly estimated the Hybrid new Keynesian Phillips curve model with a view to determine whether Phillips curve exists and ascertain whether the backward-looking or forward-looking components drive inflation dynamics in South Africa using OLS and GMM estimation techniques. The results show that the Phillips curve does not exist in South Africa using various measures of demand-side variable. These findings are robust across estimation methodologies as well as different measurements of inflation expectations and data frequency. While the findings indicated that economic agents in South Africa are both rational and adaptive in predicting inflation, the results clearly showed the dominance of forward looking component over the backward looking element in driving inflation. Secondly, given the focus of the South African monetary authority in maintaining stable inflation rates and the fact that monetary policy need to go hand-in-hand with other policies in order to ensure stable inflation and economic growth (Gruen, Pagan and Thompson, 1999), this study considered the expanded Gordon’s model with a particular focus on how fiscal policy determines the inflation process in South Africa. The purpose of the Gordon’s chapter is to verify the existence or non-existence of Phillips curve in an expanded model, within the context of an augmented “triangle” model while including the monetarist and fiscal side variables, thereby checking whether the PC relationship of recent studies is robust to model specification. Thus, the augmented Gordon’s model was estimated using a holistic approach of including the fiscalist, monetarist and the structuralist schools of thought, using the Vector autoregressive (VAR), vector error correction model (VECM) and innovation accounting techniques. The results confirm the non-existence of PC whereby output growth maintained a negative relationship with inflation rate, signifying no trade-off despite the expanded specification, while the results from output-gap model are inconclusive. Further results showed that the demand-side, fiscal factors and some of the structural variables contribute more to the inflation dynamics in South Africa. Thus the changes in inflation rate are as a result of changes in output growth, government deficit, electricity price and exchange rate. The results confirmed that the Fiscal Theory of the Price Level (FTPL) applies to the South African economy, whereby not only monetary policies should be considered in controlling inflation, but also fiscal policies. On the other hand, the importance of the determinants of inflation rate is not sufficient in observing the inflation dynamics in South Africa; therefore, this study concluded by investigating the level at which inflation becomes detrimental to output growth. In the context of the low levels of economic growth and high levels of unemployment in South Africa, the study analysed the output growth implications of the inflation targeting monetary policy of the South African Reserve Bank that targets an inflation band between three and six percent. Using the Threshold Autoregressive (TAR) and the Sample Splitting Threshold Regression (SSTR) techniques, this study investigated the nonlinear inflation-growth nexus in South Africa with the purpose of identifying the inflation rate band that optimize output growth. The results showed that South Africa is able to accommodate a higher level of inflation beyond the current inflation target band by increasing the band to between seven and nine percent in order to enhance output growth. Our findings support the argument of studies that indicate that moderately higher inflation rate will not be harmful to the economy. / MT2017

De acordo com León-Ledesma and Thirlwall (2002), o presente trabalho se propõe a testar a endogeneidade da taxa natural de crescimento para um conjunto amplo de países, no sentido do crescimento de longo prazo ser determinado pela demanda. Econometricamente, a principal hipótese a ser testada é a presença de não linearidade na Lei de Okun, que implica na existência de duas taxas naturais, cada uma correspondendo a um regime de crescimento. Utilizando dados anuais para o período de 1980 a 2007 e dados trimestrais para o intervalo entre 1980 e 2011, os resultados corroboram a hipótese de endogeneidade quando aplicada a metodologia proposta por LLT. Esta evidência se repete ao definir exogenamente os regimes de crescimento pelos métodos de Markov-Switching e threshold autoregressive regression (TAR) para os dados anuais, no entanto, para os dados trimestrais há indicações de endogeneidade e exogeneidade da taxa natural de crescimento. / Following León-Ledesma and Thirlwall (2002), this master\'s thesis aims to examine the sensitivity of the natural growth rate to the actual growth rate for a broad set of countries, based on demand-led growth theory. The main hypothesis being tested is the presence of non-linearities in Okun\'s Law, which means the existence of two natural growth rates, each corresponding to a growth regime. Using annual data over the period 1980-2007 and quarterly data over the period 1980-2011, the results support the idea that natural growth rate is dependent of the actual growth rate when applying LLT\'s methodology. This evidence repeats when establishing exogenously the regimes of growth by using Markov-Switching and threshold autoregressive regression (TAR) for the annual data, however for quarterly data this is less straightforward, having indication of endogenous and exogenous natural growth rate.

Os principais modelos de equilíbrio parcial e DSGE que estudam a dinâmica do investimento desconsideram questões centrais para a pesquisa desse tema e tem dificuldades em explicar resultados da literatura empírica. Defendemos que estudar a dinâmica do investimento como um sistema adaptativo complexo por meio de modelos de simulação baseados em agentes (ABMs) é uma alternativa promissora. Nessa dissertação motivamos, descrevemos, justificamos metodologicamente e construímos um ABM nos inspirando em modelos importantes da literatura e incorporamos às expectativas de demanda das firmas uma regra de revisão de otimismo e um mecanismo de interação em suas decisões de produção e investimento. Com isso, reproduzimos diversos fatos estilizados da literatura empírica e conseguimos testar os efeitos macroeconômicos de hipóteses teóricas relacionadas a fenômenos de contágio via confiança, motivações políticas e à reflexividade, presentes nas decisões das firmas. Nossos resultados colocam em dúvida a efetividade de mecanismos análogos à greve de investimentos, como meios dos empresários controlarem as políticas dos governos, mas confirmam que endogeneizar possíveis motivações políticas, ainda que subjetivas, no nível de confiança das firmas tem efeitos macroeconômicos substanciais. Ademais, nossos experimentos sugerem que i) tanto a evolução da produtividade, quanto dos salários reais são condições necessárias para o crescimento, ii) choques de confiança temporários tem efeitos de longo-prazo, iii) para que choques de pessimismo localizados contagiem a economia, eles precisam ser persistentes, iv) considerar o conceito de reflexividade tem consequências macroeconômicas importantes. Não encontramos evidências de que contrações fiscais do governo possam ser expansionistas, por meio de seus efeitos na confiança. / The main parcial equilibrium and DSGE models which study investment dynamics disregard core issues about this subject and have problems to explain results coming from the empirical literature. We argue that studying investment dynamics in a complex adaptive system by using Agent-Based Models is a promising alternative. In this work we motivate, describe, justify methodologically and build an ABM in line with important models from the literature and we incorporate to firms\' demand expectations an optimism revision rule and an interaction mechanism in their decisions to produce and invest. Thereby, we replicate many stylized facts from the empirical literature and we were able to test macroeconomic effects from theoretical hypothesis related to confidence-driven contagion phenomena, political motivation and reflexivity, present in firms\' decisions. Our results question the effectiveness of mechanisms analogous to the investment strikes, as a way for businessmen to control government policies, but confirm that endogenize possible political motivations, yet subjective, in the level of confidence of the firms has substantial macroeconomic effects. Furthermore, our experiments suggest that i) both productivity and real wages are necessary conditions for growth, ii) temporary confidence shocks have long-term effect, iii ) for localized shocks of pessimism, to contagion the economy, they need to be persistent, iv) consider the concept of reflexivity has important macroeconomic consequences. We find no evidence that government fiscal contractions can be expansionist, through their effects on confidence levels.

Esta dissertação procura contribuir para literatura empírica sobre crescimento econômico restrito pelo balanço de pagamentos através da investigação de como a mudança estrutural, identificada como alterações na composição setorial das exportações e importações, afeta a intensidade da restrição externa. Para tanto, são realizados dois exercícios empíricos. O primeiro fornece evidências para a validade da Lei de Thirlwall Multissetorial para um conjunto de 90 países no período 1965-1999, baseando-se na análise do erro de previsão e do desvio médio absoluto, assim como na aplicação de um teste de regressão. No segundo, apresentam-se evidências de que o crescimento econômico brasileiro no período 1962-2006 foi compatível tanto com a Lei de Thirlwall quanto com a Lei de Thirlwall Multissetorial. As implicações da Lei de Thirlwall Multissetorial foram utilizadas, então, para explorar a relação entre estrutura produtiva, mudança estrutural e restrição externa por meio da análise da evolução das elasticidades-renda ponderadas das exportações e importações. Dadas a natureza setorial deste exercício empírico e sua possível conexão com a literatura historiográfica sobre o II Plano Nacional de Desenvolvimento (1974-1979), os resultados do trabalho foram utilizados para avaliar a contribuição dos setores para a evolução das elasticidades-renda ponderadas das exportações e importações, subsidiando, assim, o debate existente acerca do ajustamento externo promovido entre 1974 e 1984. Os resultados sugerem que a interpretação de Castro (1985), mesmo quando avaliada sob uma métrica diferente daquela utilizada pelo autor, possui fundamento empírico. Porém, faz-se necessário ressaltar a qualificação de Fishlow (1986) de que a melhoria verificada na balança comercial nos anos 1983-1984 decorre em maior medida do comportamento das exportações do que das importações. / This dissertation aims to contribute to the empirical literature on balance-of-payments-constrained growth by investigating how structural change, identified with change in the sectoral composition of exports and/imports, affects the extent of the external constraint. This is done by two empirical exercises. The first one presents evidence in favor of the Multi-Sectoral Thirlwall Laws validity for a sample of 90 countries in the period 1965-1999, by analyzing the mean prediction error and the mean absolute deviation, as well as applying a regression test. In the second one, the evidence show that Brazilian economic growth in the period 1962-2006 was compatible with both Thirlwalls Law and Multi-Sectoral Thirlwalls Law. Multi-Sectoral Thirlwalls Law implications were, then, utilized to explore the relationship between productive structure, structural change and external constraint by analyzing the evolution of weighted income elasticities of exports and imports. Given the sectoral nature of this empirical exercise and its possible connection with the historical literature about the II National Development Plan (1974-1979), the results were used to evaluate the sectors contribution to the evolution of weighted income elasticities of exports and imports during the period. These findings provide additional support to the existing debate about the external adjustment promoted between 1974 and 1984. The results suggest that Castros (1985) interpretation has empirical support, even when evaluated using a different metric than the one used by the author. However, it is necessary to highlight Fishlows (1986) insight that the improvement verified in the trade balance in the years 1983-1984 came out to greater extent from exports behavior rather than from imports behavior.

by Man Ka Kit. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1994. / Includes bibliographical references (leaves 67-76). / ABSTRACT --- p.3 / INTRODUCTION --- p.4 / Chapter PART I --- WHAT IS PREDICTION? --- p.7 / Chapter 1.1 --- Structure of Scientific Explanation： Covering-Law Model --- p.8 / Chapter 1.2 --- Prediction and Theory choice --- p.10 / Chapter 1.3 --- Prediction and Economic Methodology --- p.11 / Chapter 1.4 --- Conventional Wisdom --- p.12 / Chapter 1.41 --- Friedman's Methodology --- p.12 / Chapter 1.42 --- The Impact of Popper --- p.14 / Chapter 1.5 --- Unconventional Wisdom --- p.16 / Chapter 1.51 --- KUHN AND LAKATOS --- p.16 / Chapter 1.52 --- FEYERABEND THE ANARCHIST --- p.17 / Chapter 1.6 --- Conclusion for Part I --- p.18 / Chapter PART II --- MACROECONOMIC CONTROVERSY --- p.20 / Chapter 2.1 --- "lucas' Critique, the New Classical and the New Keynesian" --- p.20 / Chapter 2.2 --- The Role of Stabilization Policy --- p.22 / Chapter 2.3 --- Effectiveness of Monetary Policy --- p.24 / Chapter 2.4 --- effectiveness of fiscal policy --- p.25 / Chapter 2.5 --- Conclusion for Part II --- p.26 / Chapter PART III --- TESTING RICARDIAN EQUIVALENCE --- p.28 / Chapter 3.1 --- ricardian equivalence versus keynesian theory --- p.29 / Chapter 3:2 --- (unrealistic) assumptions behind ricardian proposition --- p.31 / Chapter 3.21 --- "INEFINTIE horizon, altruism, and intergeneration transfer" --- p.31 / Chapter 3.22 --- IMPERFECT CAPITAL MARKET --- p.34 / Chapter 3 23 --- DISTORTIONARY TAX --- p.35 / Chapter 3.24 --- "BOUNDED rationality, PERFECT FORESIGHT, AND RATIONAL EXPECTATIONS" --- p.36 / Chapter 3.3 --- Empirical Evidence --- p.37 / Chapter 3.31 --- CONSUMPTION FUNCTION STUDIES --- p.38 / Chapter 3 32 --- INTEREST RATE STUDIES --- p.43 / Chapter 3.4 --- technical problems： (unrealistic) assumptions behind the econometric models --- p.45 / Chapter 3.41 --- Specification and Data Generation Process --- p.45 / Chapter 3 42 --- IDENTIFICATION PROBLEM --- p.48 / Chapter 3 43 --- staggerjng of (NOT-well-established) hypotheses --- p.49 / Chapter 3.44 --- PROXIES FOR unobservables --- p.50 / Chapter 3.5 --- Conclusion for Part III --- p.51 / Chapter PART IV --- CONCLUSION --- p.53 / Chapter 4.1 --- Duhem-Quine Thesis --- p.53 / Chapter 4.2 --- The Austrians and Subjectivism --- p.55 / Chapter 4.3 --- hausman --- p.57 / Chapter 4.4 --- Friedman and Popper Revisited --- p.58 / Chapter 4.5 --- The Role of Prediction --- p.61 / EPILOGUE --- p.62 / Ricardian Equivalence Vs Approximate Equivalence： Some Reflections --- p.62 / Truth and Invariance --- p.63 / "Certitude, Simplicity, and Irrationality" --- p.65 / REFERENCES --- p.67

A presente dissertação tem por objetivo discutir diferentes aspectos de um método de modelagem econômica conhecido por Modelos Stock-Flow Consistent (SFC). Essa classe de modelos tem como principais características a presença de matrizes que representam os balanços patrimoniais dos setores modelados, bem como os fluxos de transações e de fundos financeiros. A primeira etapa do trabalho consiste em analisar as origens dos modelos SFC, apresentando os trabalhos que precederam as primeiras formulações. Em seguida, é feito um survey completo da literatura SFC corrente. Essas duas etapas são realizadas através de uma revisão bibliográfica de artigos, working papers, teses e dissertações. A terceira etapa do trabalho consiste em discutir aspectos metodológicos da modelagem SFC, em especial a modelagem de equações comportamentais de expectativas. Por fim, um modelo SFC é elaborado com o objetivo de analisar o comportamento de uma economia sob quatro regimes fiscais diferentes: (i) balanço equilibrado; (ii) meta de gastos do governo como proporção do PIB; (iii) meta de déficit do governo como proporção do PIB; (iv) meta de dívida pública como proporção do PIB. O comportamento em estado estacionário desses regimes é analisado, bem como sua resiliência a choques. Entre as conclusões, percebeu-se que o segundo regime apresenta a maior taxa de crescimento no steady state, além de ser mais resiliente a choques negativos. / The general goal of this dissertation is to discuss different dimensions of a class of Post-Keynesian models known as Stock-Flow Consistent Models. The main features of these models are: (i) the presence of balance sheets matrices of the sectors to be modeled, guaranteeing the consistency in the economic stocks; (ii) the flow of funds matrix, that records the real and financial transactions of the economy. The first step of the work is to analyze the origins of the SFC models, presenting the works that preceded the first elaborations. Next to it, the current SFC literature is surveyed. These two steps are accomplished by means of a survey of the literature in academic journals, working papers, dissertations and thesis. The third step of the work is a discussion of methodological issues such as the role of expectations in the behavioral functions for consumption. Finally, the fourth step consists of elaborating a SFC model in order to analyze four fiscal policy regimes: (i) balanced budget, (ii) a target for government’s expenditures , (iii) a target for government deficit, and (iv) a target for government debt. The steady state behavior of each regime is analyzed, as well as its resilience to adverse shocks. The second regime is the one with the higher steady state growth rate and also is the more resilient to negative shocks.

<p>This thesis consists of four self-contained essays.</p><p><b>Essay 1</b> compares the dynamic behaviour of an estimated New Keynesian sticky-price model with one-period delayed effects of monetary policy shocks to the dynamics of a structural vector autoregression model. The model is estimated with Bayesian techniques on German pre-EMU data. The dynamics of the sticky-price model following either a demand shock or monetary policy shock are qualitatively and quantitatively comparable to those of the estimated structural VAR. When compared to the delayed-effects model, an alternative model with contemporaneous effects of monetary policy is rejected according to the posterior-odds ratio criterion.</p><p><b>Essay 2</b> addresses the transmission of exchange-rate variations in an estimated, small open-economy model. In contrast to the standard New Open Economy Macroeconomics framework, imported goods are treated here as material inputs to production. The resulting model structure is transparent and tractable while also able to account for imperfect pass through of exchange-rate shocks. The model is estimated with Bayesian methods on German data and the key finding is that a substantial depreciation of the nominal exchange rate leads to only modest effects on CPI inflation. An extended version of the model reveals that relatively small weight is placed on foreign consumption.</p><p><b>Essay 3</b> (with Annika Alexius) analyses the strong responses of long-term interest rates to shocks that are difficult to explain with standard macroeconomic models. Augmenting the standard model to include a time-varying equilibrium real interest rate generates forward rates that exhibit considerable movement at long horizons in response to movements of the policy-controlled short rate. In terms of coefficients from regressions of long-rate changes on short-rate movements, incorporating a time-varying natural rate explains a significant fraction of the excess sensitivity puzzle.</p><p><b>Essay 4</b> (with Pär Österholm) argues that the common finding of a large and significant coefficient on the lagged interest rate in Taylor rules may be the consequence of misspecification, specifically an omitted variables problem. Our Monte Carlo study shows that omitting relevant variables from the estimated Taylor rule can generate significant partial-adjustment coefficients, despite the data generating process containing no interest-rate smoothing. We further show that misspecification leads to considerable size distortions in two recently proposed tests to distinguish between interest-rate.</p>

This thesis consists of four self-contained essays. <b>Essay 1</b> compares the dynamic behaviour of an estimated New Keynesian sticky-price model with one-period delayed effects of monetary policy shocks to the dynamics of a structural vector autoregression model. The model is estimated with Bayesian techniques on German pre-EMU data. The dynamics of the sticky-price model following either a demand shock or monetary policy shock are qualitatively and quantitatively comparable to those of the estimated structural VAR. When compared to the delayed-effects model, an alternative model with contemporaneous effects of monetary policy is rejected according to the posterior-odds ratio criterion. <b>Essay 2</b> addresses the transmission of exchange-rate variations in an estimated, small open-economy model. In contrast to the standard New Open Economy Macroeconomics framework, imported goods are treated here as material inputs to production. The resulting model structure is transparent and tractable while also able to account for imperfect pass through of exchange-rate shocks. The model is estimated with Bayesian methods on German data and the key finding is that a substantial depreciation of the nominal exchange rate leads to only modest effects on CPI inflation. An extended version of the model reveals that relatively small weight is placed on foreign consumption. <b>Essay 3</b> (with Annika Alexius) analyses the strong responses of long-term interest rates to shocks that are difficult to explain with standard macroeconomic models. Augmenting the standard model to include a time-varying equilibrium real interest rate generates forward rates that exhibit considerable movement at long horizons in response to movements of the policy-controlled short rate. In terms of coefficients from regressions of long-rate changes on short-rate movements, incorporating a time-varying natural rate explains a significant fraction of the excess sensitivity puzzle. <b>Essay 4</b> (with Pär Österholm) argues that the common finding of a large and significant coefficient on the lagged interest rate in Taylor rules may be the consequence of misspecification, specifically an omitted variables problem. Our Monte Carlo study shows that omitting relevant variables from the estimated Taylor rule can generate significant partial-adjustment coefficients, despite the data generating process containing no interest-rate smoothing. We further show that misspecification leads to considerable size distortions in two recently proposed tests to distinguish between interest-rate.

Post Keynesian Economics (PKE) is at a cross road. The academic climate at universities has become more hostile to survival and the mainstream has become more diverse internally. Moreover, a heterodox camp of diverse groups of non-mainstream economists is forming. The debate on the future of PKE has so far focussed on the relation to the mainstream. This paper argues that this is not an important issue for the future of PKE. The debate has overlooked the dialectics between academic hegemony and economic (and social) stability. The important question is, whether PKE offers useful explanations of the ongoing socio-economic transformation. PKE has generated valuable insights but it offers little on important real world phenomena such as supply-side phenomena like the increasing use of ICT and the globalisation of production, social issues like precarisation and the polarization of income distribution or ecological challenges like climate change. It is these issues that will decide the future of PKE. (author´s abstract) / Series: Department of Economics Working Paper Series