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:The Macroeconomic Policy Institute (IMK)

The Macroeconomic Policy Institute (IMK) is an independent academic institute within the Hans-Böckler-Foundation, a non-profit organisation fostering co-determination and promoting research and academic study. The Foundation is linked to the German Confederation of Trade Unions (DGB). The IMK was founded in 2005 to strengthen the macroeconomic perspective both in economic research and in the economic policy debate. The IMK analyses business cycle developments and conducts economic policy research, notably on fiscal and monetary policy, labour markets, income distribution and financial markets. The Institute seeks to address the challenges facing macroeconomics and economic policy in the wake of the global financial crisis.

25th FMM Conference: Macroeconomics of Socio-Ecological Transition

Social inequalities, climate change and environmental pollution question the sustainability of capitalist modes of production, consumption and policies. Macroeconomists of both orthodox and heterodox traditions have long focussed on economic growth as the central means to development of the global South, prosperity and solution to distributional conflicts. We discussed what macroeconomists can contribute to this debate and learn from other fields.

25th FMM-Conference 2021
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Current Publications

Working Paper 212 (FMM Working Paper 70) : The Effect of Borrower-Specific Loan-to-Value Policies on Household Debt, Wealth Inequality and Consumption Volatility: An Agent-Based Analysis

This paper analyses the effects of borrower-specific credit constraints on macroeconomic outcomes in an agent-based housing market model, calibrated using U.K. household survey data. We apply different Loan-to-Value (LTV) caps for different types of agents: first-time-buyers, second and subsequent buyers, and buy-to-let investors. We then analyse the outcomes on household debt, wealth inequality and consumption volatility.

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FMM Working Paper 69 : Effects of fiscal consolidation on income inequality: narrative evidence from South America

Based on a narrative dataset constructed by David and Leigh (2018) that covers nine South American economies in the period 1982-2017, this paper estimates dynamic effects of fiscal consolidations on income inequality from Jordá (2005)’s local projections method. Results suggest that fiscal consolidations lead to a rise in income inequality in all specifications and data panels. When decomposing fiscal shocks, spending-based fiscal consolidations appear to significantly increase the Gini index, while tax-based fiscal consolidations do not show statistically significant effects on income inequality.

FMM publications

FMM Working Paper 68 : Bargaining Power, Structural Change, and the Falling U.S. Labor Share

One of the most significant stylized facts in the U.S. economy since the 1970s has been the decline in the share of national income accruing to labor. Many recent studies have sought to explain this trend, with most explanations focusing on structural changes such as deindustrialization, globalization, financialization, rising market concentration, and technological change. We argue that all of these forces primarily operate through a bargaining power channel measured by the cost of job loss, and that the reduction in labor’s share of income has been driven by lower bargaining power for workers. Moreover, we contend that business cycle fluctuations in the cost of job loss can help to explain the short-run behavior of the labor share as well.

FMM publications

IMK Working Paper 211 : The Effects of fiscal policy on households during the COVID-19 pandemic

In response to the economic crisis created by the COVID-19 pandemic, many governments provided financial assistance to households. Using representative consumer surveys conducted during the pandemic in 2020, we examine the effects of this fiscal policy instrument on households in two emerging economies, Vietnam and Thailand. Our paper contributes to the literature by studying consumer sentiment and durable spending responses to government financial support and the underlying transmission channels for these responses. We find that government support improves consumer sentiment and increases the likelihood of durable spending.

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FMM Working Paper 67 : The post-Keynesian “Crowding-In” Policy Meme: Government-led Semi-Autonomous Demand Growth

A recent literature has explored the role of semi-autonomous demand growth. This paper builds on the literature by incorporating a Lernerian government semi-autonomous demand function and an endogenous supply-side. Our main purpose is threefold. First, we wish to contribute to the case for crowding-in effects, especially in the long-run. Second, we confirm the Keynesian/Kaleckian pedigree of the capital stock adjustment principle. Third, we contrast core post-Keynesian ideas on demand-led supply-side endogeneity with the alternative neo-Marxian neo-Harrodian proposition of an exogenously-given natural growth rate, and find the latter lacking.

FMM publications

FMM Working Paper 66 : Aggregate Demand Externalities, Income Distribution, and Wealth Inequality

We study a two-class model of growth and the distribution of income and wealth at the intersection of contemporary work in classical political economy and the post-Keynesian tradition. The key insight is that aggregate demand is an externality for individual firms: this generates a strategic complementarity in production that results in equilibrium underutilization of the economy’s productive capacity and hysteresis in real GDP per-capita in balanced growth. This equilibrium inefficiency reverberates into both the functional distribution of income and the distribution of wealth: both the wage share and the workers’ wealth share would be higher at full capacity. Consequently, fiscal allocation policy that achieves productive efficiency also attains a higher labor share and a more equitable distribution of wealth.

FMM publications

FMM Working Paper 65 : Do corporate tax cuts boost economic growth?

The empirical literature on the impact of corporate taxes on economic growth reaches ambiguous conclusions: corporate tax cuts increase, reduce, or do not significantly affect growth. We apply meta-regression methods to a novel dataset with 441 estimates from 42 primary studies. There is evidence for publication selectivity in favour of reporting growth-enhancing effects of corporate tax cuts. Correcting for this bias, we cannot reject the hypothesis of a zero effect of corporate taxes on growth. Several factors influence reported estimates, including researcher choices concerning the measurement of growth and corporate taxes, and controlling for other budgetary components.

FMM publications

Article : Leisure and housing consumption after retirement: new evidence on the life-cycle hypothesis

Foreseeable income reductions around retirement should not affect aggregate consumption. However, given higher leisure endowments after retirement, theory also predicts lower consumption of leisure substitutes. To avoid misinterpreting this predicted drop as a puzzle, our novel approach focuses on housing consumption (complementary to leisure in utility) and controls for leisure changes.

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IMK Working Paper 210 : Do corporate tax cuts boost economic growth?

The empirical literature on the impact of corporate taxes on economic growth reaches ambiguous conclusions: corporate tax cuts increase, reduce, or do not significantly affect growth. We apply meta-regression methods to a novel dataset with 441 estimates from 42 primary studies. There is evidence for publication selectivity in favour of reporting growth-enhancing effects of corporate tax cuts. Correcting for this bias, we cannot reject the hypothesis of a zero effect of corporate taxes on growth. Several factors influence reported estimates, including researcher choices concerning the measurement of growth and corporate taxes, and controlling for other budgetary components.

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FMM Working Paper 63 : How can green differentiated capital requirements affect climate risks?

Using an ecological macrofinancial model, we explore the potential impact of the `green supporting factor' (GSF) and the `dirty penalising factor' (DPF) on climate-related financial risks. We identify the transmission channels by which these green differentiated capital requirements (GDCRs) can affect credit provision and loan spreads, and we analyse these channels within a dynamic framework in which climate and macrofinancial feedback effects play a key role.

FMM publications

IMK Policy Brief 105 : ECB strategy

The ECB’s strategy of inflation targeting as currently practiced requires only minor adjustments to allow the ECB to best provide price stability and support the EU’s general economic policies. The key to inflation targeting is a distinct and symmetric inflation target that serves as a benchmark for private-sector expectations and a central bank that is held accountable and transparently justifies its policy actions

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IMK Working Paper 209 : Germany’s Labour Market in Coronavirus Distress – New Challenges to Safeguarding Employment

Working-time reductions, mainly through short-time work (STW), were the major factor in safeguarding employment in the Coronavirus Crisis. STW was more rapidly extended, more generous, and for the first time a stronger focus was put on securing household income. Low-wage earners are affected more frequently by STW than in the past and suffered relatively greater earnings losses compared to others.

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IMK Workind Paper 208 : Risk sharing revisited

The euro area crisis has revealed a lack of cross-country risk sharing. Frequently used estimation methods to determine the empirical contribution of the different risk sharing mechanisms have important shortcomings. The ongoing debate about reforming the euro area would benefit from complementary empirical approaches.

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