This paper derives measures of potential output and capacity utilization for a number of OECD countries, using a method based on the cointegration relation between output and the capital stock. The intuitive idea is that economic capacity (potential output) is the aspect of output that co-varies...

The idea that saving is the force driving private investment and economic growth has become ever more entrenched in mainstream economic thought as well as in the minds of policymakers and the general public. Even though the empirical evidence that increased household saving will directly...

Based on neoclassical theory, cutting budget deficits has come to be seen as a principal way to increase long-run growth, but the empirical evidence is ambiguous on the outcome of this macropolicy. A new model, the classical growth cycles (CGC) model, offers an alternative theoretical framework...

This paper addresses two broad questions. The first one relates to the economic rationale for the existence of the welfare state. To address this question, we review the marginalist arguments and then counterpose a historical and institutional analysis of the rise of the U.S. welfare state. The...

This paper raises questions about austerity policies by investigating the effects of the state's tax and expenditure policies on the warranted growth rate. It proposes two mechanisms to raise the warranted growth rate in the event that there is long-run unemployment. First, it incorporates...

This paper contrasts the different approaches to export-led growth used by Harrod and Thirlwall. It argues that, unlike Thirlwall's model, Harrod emphasized the importance of both demand- and supply-sides in his analysis of growth. The fundamental difference between the two authors lies in their...

This paper investigates the effects of budget deficits within a classical-Harrodian framework in a closed economy. In this framework, growth and cycles are endogenous, underutilized capacity is a recurrent phenomenon, capacity utilization fluctuates around the normal level in the long run, and...

This paper is an extension of an earlier working paper ("Finance and the Macroeconomic Process in a Classical Growth and Cycles Model," Levy Institute Working Paper No. 253). The basic structure of the model remains unchanged in that it is based on a social accounting matrix (SAM) with...

In this paper the impact of fiscal policy is analyzed within the context of an endogenous growth and cycles model. The investigation shows the different situations in which government expenditure can lead to both crowding-in and crowding-out of output and employment. With regard to the cycle, an...

The aim of this paper is to derive an endogenous growth and cycles model that integrates sectoral incomes, expenditures, and finance requirements into an ex ante social accounting matrix (SAM) in the spirit of the Cambridge Economic Policy Group. The SAM includes households, businesses, a...