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This article offers a monetary perspective on capital flows and the Eurozone's north-south divide. It argues that finance-centric narratives in comparative political economy rightly emphasize financial instability in the periphery, but that the role of capital flows therein requires clarification. The article draws on post-Keynesian monetary theory, coherent accounting, and balance-of-payments data to make three points. First, the focus on the financial account as a driver of current accounts should be abandoned in favor of an analysis of gross capital flows. Gross flows need not stem from excess savings in core countries and can be independent from trade flows. Second, explanations of financial instability in the periphery should go beyond bank flows and consider speculative portfolio flows into bond markets and foreign direct investment into real estate. Third, rising spreads in the periphery during the Eurozone crisis and the outbreak of the pandemic were not triggered by balance-of-payments problems but by a reversal of speculative bond flows. Comparative political economy should thus dedicate more attention to institutions that render peripheral countries susceptible to speculative flows into asset markets. [ABSTRACT FROM AUTHOR]

The aim of this paper is to investigate the long run sustainability of a growth path led by multiple non-creating capacity autonomous expenditures in a demand led-supermultiplier model for a small open economy. Using two different models the results show that it is impossible to have in the same model long-term economic growth driven by the non-capacity creating component of domestic demand, exogenous income distribution, long-run balance between productive capacity and aggregate demand and balance of payments equilibrium. Economic viability of the balanced-growth path demands growth to be led by exports, at least for small open economies. [ABSTRACT FROM AUTHOR]

This article implies that the time is ripe for a new paradigm in economic theory comprising classical (Ricardian) and Keynesian elements of analysis. The central Section Five presents the basic equations of classical-Keynesian political economy, the price and the quantity equation, based on three constitutive principles: the classical labour value and surplus principles and the Keynesian principle of effective demand. Subsequently, two employment mechanisms implied in the super-multiplier relation, the classical-Keynesian quantity equation, are mentioned, the internal and the external employment mechanism. Section Seven provides an analysis of the actual situation on the basis of the external employment mechanism, associated with cumulative processes of increasing disequilibria and inequalities. Given this, it ought to be replaced by the internal employment mechanism, allowing for Keynesian employment and distribution policies (Section Eight). However, the internal mechanism can only be implemented if a new world economic order is brought about, based upon a supranational currency, that is, Keynes's bancor, to ensure balance of current account equilibria worldwide. Section Ten sets forth Keynes's social liberalism, the social philosophy underlying classical-Keynesian political economy, the fundamental social ethical value of which is the Common Good. Social Liberalism thus emerges as the alternative to Capitalism and Socialism. [ABSTRACT FROM AUTHOR]

The paper expands the BOP-constraint growth model and Kaldorian regimes (productivity and demand regimes) in order to include some of the concerns raised by ecological economics in post-Keynesian models for open economies. The demand regime is modified by taking into account Porter's hypothesis, which suggests that environmental innovations, spurred by environmental policies, can foster competitiveness. As a result, the equilibrium BOP-constrained rate of growth increases, leading to a different version of Thirlwall's Law, which opens room for analyzing the impact of environmental innovations on convergence between developing and developed economies. The productivity regime in turn considers the growth and employment implications of innovations in labor productivity (standard innovations) and environmental efficiency (environmental innovations). It is argued that the fiscal policy and composition of public expenditure matter for long run growth, employment and sustainability. [ABSTRACT FROM AUTHOR]