The apparently never-ending phase of economic slowdown that advanced economies have been experiencing in recent decades has recently contributed to the resurrection of the hoary old argument of ‘secular stagnation’. In this paper, situated intellectually within the strand of research documenting the negative impact on growth of inequality and financialization, we elaborate on the idea that such a prolonged period of stagnation is associated with a new paradigm of socio-economic policy, known as ‘finance-dominated capitalism’. In this way, we distance ourselves from the mainstream ‘secular stagnation’ narrative, adopting instead a post-Keynesian perspective that allows us to discuss the links between financialization and inequality, on one hand, and economic performance, on the other. Then, we submit our arguments to empirical scrutiny by undertaking an econometric analysis of 21 OECD countries between 1990 and 2016. The evidence indicates that excessive levels of financialization, along with high inequality and weak labor market institutions, have a negative impact on real growth. Based on our findings, we propose possible demand-side policies, to be implemented through expansionary fiscal measures, which could help sustain GDP growth and employment in the current context of stagnation, mitigating income inequality and sustaining an inclusive recovery at the same time.

When Melius Abundare Is No Longer True: Excessive Financialization and Inequality as Drivers of Stagnation

Paternesi Meloni, Walter;
2020

Abstract

The apparently never-ending phase of economic slowdown that advanced economies have been experiencing in recent decades has recently contributed to the resurrection of the hoary old argument of ‘secular stagnation’. In this paper, situated intellectually within the strand of research documenting the negative impact on growth of inequality and financialization, we elaborate on the idea that such a prolonged period of stagnation is associated with a new paradigm of socio-economic policy, known as ‘finance-dominated capitalism’. In this way, we distance ourselves from the mainstream ‘secular stagnation’ narrative, adopting instead a post-Keynesian perspective that allows us to discuss the links between financialization and inequality, on one hand, and economic performance, on the other. Then, we submit our arguments to empirical scrutiny by undertaking an econometric analysis of 21 OECD countries between 1990 and 2016. The evidence indicates that excessive levels of financialization, along with high inequality and weak labor market institutions, have a negative impact on real growth. Based on our findings, we propose possible demand-side policies, to be implemented through expansionary fiscal measures, which could help sustain GDP growth and employment in the current context of stagnation, mitigating income inequality and sustaining an inclusive recovery at the same time.
File allegati a questo prodotto
File Dimensione Formato  
Paternesi-Meloni_When-melius_2020.pdf

solo gestori archivio

Note: Articolo
Tipologia: Versione editoriale (versione pubblicata con il layout dell'editore)
Licenza: Tutti i diritti riservati (All rights reserved)
Dimensione 2.56 MB
Formato Adobe PDF
2.56 MB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1657588
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 8
  • ???jsp.display-item.citation.isi??? 7
social impact