PSL Quarterly Review

The Post-Pandemic Inflation Debate: A Critical Review

Diogo Martins — 2025-01-15

This article offers a critical review of the post-pandemic inflation debate. The first section organizes the debate by categorizing the arguments into two broad perspectives: the neoclassical view and the critical political economy view, along with several subcategories. This classification is guided by the positions that participants in the debate took regarding the origins and propagation mechanisms of inflation, as well as the economic policy solutions proposed to address the current inflationary period. The second section highlights that the dominance of contractionary monetary policy as the primary response to contemporary inflation rests on weak foundations, with its theoretical and empirical justifications having been consistently and convincingly challenged by critical political economy circles over the past decades.

Inflation dynamics in India: A structural view

Ramgopal Kundurthi — 2025-01-15

The recent unprecedented global inflation has focussed attention on the supply side inflation dynamics. The Indian inflation episodes, however, have been largely associated with supply shortages and, on average, remained elevated through the last four decades, with different policy phases generating, at best, mixed results. This paper explores the Indian inflation dynamics through a structural paradigm, analysing factors such as sectoral growth imbalances and administered prices. The structural factors are observed to explain a significant part of the inflation, thus suggesting the need for government action on logistics management in the short term and structural reforms in the long run.

Central banks and climate change: Main issues and perspectives

Lorenzo Esposito — 2025-01-15

In the last decades, during the unfolding of momentous events, we saw the growing awareness of the need for a transition to a sustainable economy. The radical economic and social change will require the mobilization of colossal resources, and hence the alignment of the financial system to this goal. Climate change also affects the functions of central banks. First of all, it can affect macroeconomic conditions, forcing a different approach to monetary policy and financial stability. Secondly, it affects the risks of banks and other financial intermediaries, thus financial supervision. Finally, the transition also affects the payment system. In this work, we will try to sum up the main topics concerning the links between central banks, the transition, and the possible objections to them. We conclude that an efficient transition requires that the financial markets business model become sustainable, a goal that becomes more difficult in the new geo-political situation.

Ownership concentration and investment performance of Austrian listed companies

Nouman Afgan — 2025-01-15

We apply panel estimation techniques to full population of Austrian corporations from 2007-2020 in order to analyze the impact of ownership concentration on performance. Return on investment (ROI) is lower than cost of capital, which insinuates that managers invest beyond optimal investment level instead of maximizing shareholders’ wealth. ROI for pyramidal firms is 35% lower than cost of capital implying that managers pursue their objectives. State-owned firms’ ROI is 28% lower than cost of capital showing that discretionary investments lead to sub-optimal performance. An inverted U-curve is estimated with a turning point at 69% voting rights, beyond which entrenchment effect dominates the incentives effect for 37% firms. This evidence confirms minority shareholders’ expropriation, which has repercussions for efficient governance in Austrian corporations.

The effect of financial development on per capita income: A panel data analysis for heterogeneous countries between 1980 and 2020

Felipe Massafera — 2025-01-15

This paper aims to investigate the relationship between the development of the financial market and per capita income. For this, panel data methods were used to analyze proxy variables of depth, risk and liquidity of the financial system for a heterogeneous sample of 95 countries from 1980 to 2020. The results suggest that while depth and liquidity of the financial system are positively related to per capita income, the risk level of the financial system is negatively related to it. Furthermore, bank credit was shown to be more significant in increasing the level of per capita income for developing countries. In developed countries, however, capital market variables most affected per capita income.

A contribution to a Keynesian-Sraffian synthesis: Kregel on financial macroeconomics

Alessandro Roncaglia — 2025-01-15

As a review of Kregel’s book Financial Macroeconomics (London: Anthem Press, 2024), the article illustrates Kregel’s original interpretation of Keynes and its compatibility with a Keynesian-Sraffian approach alternative to both mainstream economics and other heterodox theories. Kregel’s analysis focuses on the analytical relations between own rates of own return and own rates of monetary return for commodities and the rate of interest.

A unifying theme for stray cats? Issues in heterodox discourses

Paolo Ramazzotti — 2025-01-15

The article discusses three books (Whalen, 2022a; Westra 2022; Chester and Jo, 2022a) that deal with the need for a heterodox approach to economics from a variety of perspectives. It discusses the possibility of achieving a unifying theme that characterizes heterodox economics along with the existence of a commonly accepted criterion to assess the quality of economic research. It points to the importance of a variety of lively research perspectives that pursue well-being rather than the quest for an all-encompassing, unitary theory of the economy. A major goal, to this end, is greater dialogue among the different strands of thought.