An exogenous money supply—controlled through central bank interventions—was a fundamental tenet of monetarism and New Classical economics. Post Keynesians have developed an extensive literature arguing that the money supply is in fact endogenous: market forces combine with central banks to establish the supply of money and credit in the economy.  But Post Keynesians have long debated the meaning of this endogeneity, along with the extent that interest rates are set exogenously by central banks. Two new PERI Working Papers, by Robert Pollin and Thomas Palley, bring new perspectives to these issues.

Pollin traces the movement of market interest rates in the U.S. relative to the Federal Reserve-controlled Federal Funds rate, concluding that market rates are primarily set endogenously.  The paper then discusses how the instability of deregulated financial markets leads participants to make wide swings in risk assessments over time. It follows that regulatory policies to stabilize markets and interest rates will increase interest rate exogeneity. He concludes with proposals for establishing greater control over market interest rates.

Palley examines the controversies among Post Keynesians regarding the determination of money supply. He explores the "horizontalist" vs. "structuralist" approaches to money supply endogeneity.  He concludes that these terms are no longer adequate for understanding the implications money supply endogeneity in relation to interest rate determination, business cycles, economic growth, and regulatory policy.

>> Download Robert Pollin's "Considerations on Interest Rate Exogeneity"

>> Download Thomas Palley's "Endogenous Money: Implications for the Money Supply Process, Interest Rates, and Macroeconomics"

Is ‘patrimonial capitalism’ a useful descriptor of developed economies in the post-Fordist era? In this PERI Working Paper, Nacho Álvarez Peralta and Bibiana García review the meaning of this term, and consider its usefulness in describing the transformations in the wage-labor nexus over the past thirty years. Looking specifically at the U.S. and France, the authors review the patrimonial capitalist assessment of changes in the world economy, focusing particularly on employee shareholding, the role of institutional investors, and the role of financial markets in national economies. The authors assess some of the deficiencies of this analytic framework, and suggest an alternative, which takes into more central account the role of financialization in the world economy and the erosion of wages on a global scale.

>> Download "Financial Globalization and Labor: Employee Shareholding or Labor Regression?"

The unemployment rate is conventionally relied upon to measure employment performance, and has been the main indicator justifying deregulation and unemployment benefit reduction. In this Working Paper, David R. Howell, Anna Okatenko and Mamadou Diallo make the case that a well-functioning labor market should produce not just enough jobs, but enough decent jobs. The authors compare U.S. and French performance according to: 1) the low-wage share of employment; 2) the underemployed share of the labor force; and 3) the adequately employed share of the working age population.

The authors find that with very few exceptions, French workers of all ages, education levels, and genders have dramatically lower rates of underemployment and low-wage employment, and much higher rates of adequate employment than their U.S. counterparts. The authors conclude by recommending that indicators such as these, and not just the unemployment rate, should have a central place in discussions of national labor market reform.

>> Download “By What Measure? A Comparison of French and U.S. Labor Market Performance with New Indicators of Employment Adequacy”