‘Fiscal policy and ecological sustainability: a post-Keynesian perspective’ PKES Working Paper 1912, 2019 (with M. Nikolaidi)
Fiscal policy has a strong role to play in the transition to an ecologically sustainable economy. This paper critically discusses the way that green fiscal policy has been analysed in both conventional and post-Keynesian approaches. It then uses a recently developed post-Keynesian ecological macroeconomic model in order to provide a comparative evaluation of three different types of green fiscal policy: carbon taxes, green subsidies and green public investment. We show that (i) carbon taxes reduce global warming but increase financial risks due to their adverse effects on the profitability of firms and credit availability; (ii) green subsidies and green public investment improve ecological efficiency, but their positive environmental impact is partially offset by their macroeconomic rebound effects; and (iii) a green fiscal policy mix derives better outcomes than isolated policies. Directions for future heterodox macroeconomic research on the links between fiscal policy and ecological sustainability are suggested.
Climate change, financial stability and monetary policy PKSG Working Paper 1712, 2017 (with M. Nikolaidi and G. Galanis)
Using a stock-flow-fund ecological macroeconomic model, we analyse (i) the effects of climate change on financial stability and (ii) the financial and global warming implications of a green QE programme. Emphasis is placed on the impact of climate change damages on the price of financial assets and the financial position of firms and banks. The model is estimated and calibrated using global data and simulations are conducted for the period 2015-2115. Four key results arise. First, by destroying the capital of firms and reducing their profitability, climate change is likely to gradually deteriorate the liquidity of firms, leading to a higher rate of default that could harm both the financial and the non-financial corporate sector. Second, climate change damages can lead to a portfolio reallocation that can cause a gradual decline in the price of corporate bonds. Third, financial instability might adversely affect credit expansion and the investment in green capital, with adverse feedback effects on climate change. Fourth, the implementation of a green QE programme can reduce climate-induced financial instability and restrict global warming. The effectiveness of this programme depends positively on the responsiveness of green investment to changes in bond yields.
A stock-flow-fund ecological macroeconomic model PKSG Working Paper 1612, 2016 (with M. Nikolaidi and G. Galanis)
This paper develops a stock-flow-fund ecological macroeconomic model that combines the stock-flow consistent approach of Godley and Lavoie with the flow-fund model of Georgescu-Roegen. The model has the following key features. First, monetary and physical stocks and flows are explicitly formalised taking into account the accounting principles and the laws of thermodynamics. Second, Georgescu-Roegen’s distinction between stock-flow and fund-service resources is adopted. Third, output is demand-determined but supply constraints might arise either due to environmental damages or due to the exhaustion of natural resources. Fourth, climate change influences directly the components of aggregate demand. Fifth, finance affects macroeconomic activity and the materialisation of investment plans that determine ecological efficiency. The model is calibrated using global data. Simulations are conducted to investigate the trajectories of key environmental, macroeconomic and financial variables under (i) different assumptions about the sensitivity of economic activity to the leverage ratio of firms and (ii) different types of green finance policies.
Debt cycles, instability and fiscal rules: a Godley-Minsky model Economics Working Paper Series, 1509, University of the West of England, 2015.
Wynne Godley and Hyman Minsky were two macroeconomists who ‘saw the crisis coming’. This paper develops a simple macrodynamic model that synthesises some key perspectives of their analytical frameworks. The model incorporates Godley’s financial balances approach and postulates that private sector’s propensity to spend is driven by a stock-flow norm (the target net private debt-to-income ratio) that changes endogenously via a Minsky mechanism. It also includes two fiscal rules: a Maastricht-type fiscal rule, according to which the fiscal authorities adjust the government expenditures based on a target net government debt ratio; and a Godley-Minsky fiscal rule, which links government expenditures with private indebtedness following a counter-cyclical logic. The analysis shows that (i) the interaction between the propensity to spend and net private indebtedness can generate cycles and instability; (ii) instability is more likely when the propensity to spend responds strongly to deviations from the stock-flow norm and when the expectations that determine the stock-flow norm are highly sensitive to the economic cycle; (iii) the Maastricht-type fiscal rule is destabilising while the Godley-Minsky fiscal rule is stabilising; and (iv) the paradox of debt can apply both to the private sector and to the government sector.
The Contribution of the Social Protection System to Economic Growth, Study 26, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2013 (with C. Papatheodorou; in Greek).
Macroeconomic Policy, Functional Income Distribution and Inequality: A Theoretical Analysis, Study 23, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2012 (with C. Papatheodorou; in Greek).
The Sovereign Debt Crisis in Greece: Causes and Prospects, Report 4, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2011 (with G. Argitis and M. Nikolaidi; in Greek).
Public Programme Budgeting: An Institution Conducive to Economic and Social Development or to Fiscal Austerity? Study 11, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2011 (with G. Argitis and A. Marsellou; in Greek).
Dimensions of Labourers’ Poverty and Deprivation in Greece and the Attica, Hellenic Social Policy Association, Athens, 2010 (with C. Papatheodorou; in Greek).
Structure and Trends in Economic Inequality and Poverty in Greece and the EU, 1995-2008, Report 2, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2010 (with C. Papatheodorou; in Greek).
Macroeconomic Environment, Inequality and Poverty: An Empirical Investigation for the Impact of Economic Growth and Social Protection in Greece and the EU, Study 3, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2010 (with C. Papatheodorou; in Greek).
Economic Growth, Inequality and Poverty: Theoretical and Empirical Approaches, Study 2, Observatory of Economics and Social Developments, Labour Institute, Greek General Confederation of Labour, 2010 (with C. Papatheodorou, E. Papadopoulou and G. Sakellaridis; in Greek).
Economic Inequality and Poverty in Greece: Comparative Analysis and Intertemporal Trends, Report 1, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2008 (with C. Papatheodorou, S. Danchev and Α. Marsellou; in Greek).
Poverty in Greece: Similarities and Differences under Alternative Methodological Approaches, Study 1, Observatory of Economic and Social Developments, Labour Institute, Greek General Confederation of Labour, 2008 (with A. Theofilakou, C. Mavrodimitrakis and P. Tsakloglou; in Greek).