scholarly journals Mathematical Model of MMT with Profit Return under Monopolistic Competition

2021 ◽  
Vol 8 (2) ◽  
pp. 65
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Budget Deficit ◽  
Monopolistic Competition ◽  
Full Employment ◽  
Returns To Scale ◽  
Budget Deficits ◽  
Price Inflation ◽  
The Difference ◽  
Growing Economy ◽  
Necessary And Sufficient ◽  
Constant Returns To Scale

Even under constant returns to scale technology there is a positive profit return if the goods are produced in monopolistic competition. By a two-periods overlapping generations (OLG) model with production in monopolistic competition under constant returns to scale in which the economy grows by technological progress and the older generation consumers receive the profits, we consider the problem of budget deficit. We show that the budget deficit equals the difference between the net savings of the younger generation consumers excluding the profits received in the future and that of the older generation consumers in each of the following cases. Also, the following results will be proved. 1) A budget deficit is necessary to realize full employment with constant price when the economy grows. 2) If the budget deficit exceeds the level necessary and sufficient to maintain full employment in a growing economy with constant price, inflation will occur. A stable budget deficit is necessary to prevent further inflation. 3) If the budget deficit is insufficient to maintain full employment, a recession with involuntary unemployment occurs. We can overcome a recession and restore full employment making a budget deficit larger than the one necessary and sufficient to maintain full employment without a recession. Since we can maintain full employment by constant budget deficits, we should not offset the deficit created for overcoming the recession by budget surpluses.

scholarly journals A Mathematical Model of MMT (Modern Monetary Theory) with Profit Return

2021 ◽  
Vol 11 (4) ◽  
pp. 39
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Technological Progress ◽  
Budget Deficit ◽  
Full Employment ◽  
Returns To Scale ◽  
Perfect Competition ◽  
Budget Deficits ◽  
Price Inflation ◽  
The Difference ◽  
Growing Economy ◽  
The One

Even in perfect competition there is a positive profit return if the good is produced with decreasing returns to scale technology. Using a two-periods overlapping generations (OLG) model with production under perfect competition with decreasing returns to scale technology in which the economy grows by technological progress and the older generation consumers receive the profit returns, we consider the problem of budget deficit under economic growth. We will show the following results. 1) We need a budget deficit to achieve full employment under constant price when the economy grows by technological progress. 2) If the budget deficit exceeds the level necessary to maintain full employment in a growing economy under constant price, inflation will be triggered. We need a stable budget deficit to prevent further inflation. 3) If the budget deficit is insufficient to maintain full employment, it will cause a recession with involuntary unemployment. We can overcome a recession and restore full employment caused by insufficient budget deficit by a budget deficit larger than the one necessary and sufficient to maintain full employment without a recession. We should not offset the deficit created to overcome the recession by subsequent surpluses because we can maintain full employment through constant budget deficits. Also, we show that in each case the budget deficit equals the difference between the net savings of the younger generation consumers and that of the older generation consumers.

scholarly journals Very Simple Mathematical Model of MMT (Modern Monetary Theory)

2021 ◽  
Vol 11 (3) ◽  
pp. 78
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Technological Progress ◽  
Budget Deficit ◽  
Full Employment ◽  
Returns To Scale ◽  
Perfect Competition ◽  
Monetary Theory ◽  
Budget Deficits ◽  
Growing Economy ◽  
The One ◽  
Constant Returns To Scale

The purpose of this paper is to provide a concise theoretical and mathematical foundation for the major parts of the debate in the recently discussed school of economics called Modern Monetary Theory (MMT), while maintaining the basics of the neoclassical microeconomic framework, such as utility maximization of consumers using budget constraints and utility functions, and equilibrium of demand and supply of goods under perfect competition with constant returns to scale technology. By a two-periods overlapping generations (OLG) model in which the economy grows by technological progress, we will show that: 1) We need a budget deficit to achieve full employment with constant price when the economy grows by technological progress. This budget deficit should not be offset by future surplus; 2) A budget deficit that exceeds the level necessary to maintain full employment in a growing economy with constant price will cause inflation. A stable budget deficit is required to prevent further inflation; 3) A budget deficit that is insufficient to maintain full employment will cause a recession with involuntary unemployment. A budget deficit larger than the one necessary and sufficient to maintain full employment without a recession can overcome a recession caused by insufficient budget deficit and restore full employment. The deficit created to overcome the recession should not be offset by subsequent surpluses, since full employment can then be maintained through constant budget deficits.

scholarly journals Fiscal Policy as a Solution to Involuntary Unemployment

Ekonomika ◽  
2021 ◽  
Vol 100 (2) ◽  
pp. 63-83
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Fiscal Policy ◽  
Budget Deficit ◽  
Monopolistic Competition ◽  
Full Employment ◽  
Returns To Scale ◽  
Profit Maximization ◽  
Involuntary Unemployment ◽  
Game Theoretic ◽  
Constant Returns To Scale ◽  
Constant Prices

We show the existence of involuntary unemployment based on consumers’ utility maximization and firms’ profit maximization behavior under monopolistic competition with increasing, decreasing or constant returns to scale technology using a three-periods overlapping generations (OLG) model with a childhood period as well as younger and older periods, and pay-as-you-go pension for the older generation, and we analyze the effects of fiscal policy financed by tax and budget deficit (or seigniorage) to achieve full-employment under a situation with involuntary unemployment. Under constant prices we show the following results. 1) If the realization of full employment will increase consumers’ disposable income, in order to achieve full-employment from a state with involuntary unemployment, we need budget deficit (Proposition 1). 2) If the full-employment state has been achieved, we need balanced budget to maintain full-employment (Proposition 2). We also consider fiscal policy under inflation or deflation. Additionally, we present a game-theoretic interpretation of involuntary unemployment and full-employment. We also argue that if full employment should be achieved in equilibrium, the instability of equilibrium can be considered to be the cause of involuntary unemployment.

scholarly journals An Elementary Mathematical Model for MMT (Modern Monetary Theory)

2021 ◽  
Vol 13 (3) ◽  
pp. 1
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Technological Progress ◽  
Utility Maximization ◽  
Budget Deficit ◽  
Monopolistic Competition ◽  
Full Employment ◽  
Supply And Demand ◽  
Profit Maximization ◽  
Static Model ◽  
Monetary Theory ◽  
Necessary And Sufficient

In recent years, a school of economics called MMT (Modern Monetary Theory) has been attracting attention, but it has not been analyzed theoretically or mathematically. This study aims to provide a theoretical basis for the skeleton of the MMT argument, while maintaining the basics of the neoclassical microeconomic framework, such as utility maximization of consumers by means of utility functions and budget constraint, profit maximization of firms in monopolistic competition, and equilibrium of supply and demand of goods. Using a simple static model that includes economic growth due to technological progress, we will argue that: 1) a continuous budget deficit is necessary to maintain full employment when the economy is growing, and that this deficit does not have to be covered by future surpluses; 2) Inflation is caused when the actual budget deficit exceeds the level necessary and sufficient to maintain full employment. In order to avoid further inflation, it is necessary to maintain a certain level of budget deficit; 3) A shortfall in the budget deficit leads to recession and involuntary unemployment. To recover from this, a budget deficit that exceeds the level necessary to maintain full employment is required. However, since a continuous budget deficit is necessary after full employment is restored, the deficit created to overcome the recession does not need to be covered by future budget surpluses, nor should it be.

scholarly journals Inputs Price Transmission Effect on Marketing Margins on Fisheries Products of Iran

2015 ◽  
Vol 10 (1) ◽  
pp. 184
Author(s):  
Mahdi Saravani ◽  
Nazar Dahmarde Ghaleno
Keyword(s):  
Cold Water ◽  
Returns To Scale ◽  
Sufficient Conditions ◽  
Price Transmission ◽  
Labor Costs ◽  
Marketing Costs ◽  
The One ◽  
Necessary And Sufficient ◽  
Marketing Margins ◽  
Constant Returns To Scale

Volatility and instability of inputs price and products on the one hand and high marketing margins, on the other hand are the main characters of inefficient marketing of agricultural products. So in this paper we will consider the Prices Transmission of Inputs and Marketing Costs on Marketing Margin of Fisheries Products during 2004 to 2014. The variables examined in this study which were extracted from the website of Fisheries and Statistics Center of Iran, include hot and cold water fish prices (Larve and Fingerling), Fishmeal and Concentrate (inputs), transport and labor costs and amount of used inputs. The results show that Necessary and sufficient conditions for coincidence of inputs price transmission has rejected and mediators through asymmetrical transmission of input prices to retails increase marketing margin and thereby earn profits. The coincident test also in the transfer of marketing costs showed asymmetry coincidence of marketing costs. The variable of total amount of inputs that is considered as an explanatory variable to ensure assume constant returns to scale in marketing margin model, Its impact on marketing margins is incremental and statistically significant. The process trend variable coefficient also shows that market margins will increase over time. To improve this situation it is suggested to establish the Notification institutions of market.

Fiscal Policy in Europe

2007 ◽  
Vol 201 ◽  
pp. 33-36 ◽  
Author(s):  
Ray J Barrell ◽  
Sylvia Gottschalk
Keyword(s):  
Budget Deficit ◽  
Stochastic Simulations ◽  
Forecast Errors ◽  
Budget Deficits ◽  
Government Budget ◽  
The Past ◽  
Large Numbers ◽  
The Difference ◽  
The Government ◽  
One Year

In the past twelve months the government budget situation in Germany has improved markedly, and the budget deficit has moved from 3.2 per cent of GDP in 2005 to 1.7 per cent in 2006, with further improvements in prospect. Over the same period in France, the budget deficit moved marginally from 3 per cent of GDP in 2005 to 2.5 per cent of GDP in 2006. The prospects for further improvement appear limited as the new government plans to cut taxes to stimulate the economy. Projections for budget deficits are very uncertain, as they are the difference between two large numbers (receipts and spending) that are difficult to predict accurately. Figures 1 and 2 plot the errors around our budget projections for France and Germany based on stochastic simulations on NiGEM. The 95 per cent confidence limit for our forecast one year ahead is around 1 per cent of GDP around our central forecast, and uncertainty increases into the future. As we can see from figures 3 and 4, our forecast errors for France and Germany have been well within the 95 per cent bands in the past three years, except for our one year ahead forecast for Germany for 2006. The budget improved by 1.5 per cent of GDP more than we had anticipated, and this appears to have been due to unexpectedly high tax receipts, rather than to changed policy.

On the Effects of Wage Pressure on the Unemployment Rate and Capital Share

2006 ◽  
Vol 7 (4) ◽  
pp. 389-401 ◽  
Author(s):  
Takashi Ohno
Keyword(s):  
Labour Market ◽  
Unemployment Rate ◽  
Monopolistic Competition ◽  
Returns To Scale ◽  
Increasing Returns ◽  
Stylized Facts ◽  
Important Conclusion ◽  
The Past ◽  
Capital Share ◽  
Constant Returns To Scale

Abstract The purpose of this paper is to understand the behaviour of the capital share and the unemployment rate in Europe over the past quarter of a century. We consider a model with monopolistic competition, increasing returns and an imperfect labour market, assuming that the elasticity between capital and labour is less than unity. Previous works have generally assumed constant returns to scale. Our results offer an important conclusion, namely that increased wage pressure will increase the unemployment rate and the capital share even though the latter initially decreases, which fits the stylized facts about the studied economies.

Involuntary Unemployment as a Nash Equilibrium and Fiscal Policy for Full Employment

2021 ◽  
pp. 2150018
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Nash Equilibrium ◽  
Fiscal Policy ◽  
Budget Deficit ◽  
Full Employment ◽  
Aggregate Demand ◽  
Fiscal Policies ◽  
Budget Deficits ◽  
Overlapping Generations Model ◽  
Involuntary Unemployment ◽  
Game Theoretic

This study aimed to provide a game-theoretic interpretation of the analyses of involuntary unemployment by deficiency of aggregate demand and fiscal policy to achieve full employment using an overlapping generations model. We showed that involuntary unemployment is in a Nash equilibrium of a game with a firm and consumers. Moreover, we showed that full employment can be achieved through fiscal policies that create budget deficits in recessionary conditions with involuntary unemployment. Once full employment is achieved, it can be sustained without a budget deficit.

Lending Efficiency of Indian Commercial Banks: A Data Envelopment Approach

2006 ◽  
Vol 31 (2) ◽  
pp. 152-168
Author(s):  
Ram Pratap Sinha
Keyword(s):  
Public Sector ◽  
Cost Efficiency ◽  
Commercial Banks ◽  
Parametric Method ◽  
Returns To Scale ◽  
Allocative Efficiency ◽  
Commercial Banking ◽  
Data Envelopment ◽  
The Difference ◽  
Constant Returns To Scale

The lending environment in the Indian commercial banking industry changed considerably in the reform years following widening of priority sector definition, dismantling of Credit Authorisation Scheme and introduction of risk based supervision. In this context, the present paper attempts to compare the performances of commercial banks in the reform period in respect of lending (in a cost minimisation framework) making use of Data Envelopment Analysis – a non-parametric method which is quite suitable for making inter-(productive)unit comparison. The commercial banks have been assumed to obey constant returns to scale. The results obtained from the study are as under: (i) The observed private sector commercial banks exhibited higher mean cost efficiency than the observed public sector commercial banks. This is perhaps indicative of the problems that persist in the lending environment which caused the public sector commercial banks to shy away from lending. (ii) The difference in cost efficiency scores emanated mainly from differences in mean allocative efficiency scores exhibited by the two bank groups. Further, the observed commercial banks show considerable fluctuations in allocative efficiency scores across the years.

scholarly journals INDIVISIBLE LABOR SUPPLY AND INVOLUNTARY UNEMPLOYMENT: MONOPOLISTIC COMPETITION MODEL

2020 ◽  
pp. 1-14
Author(s):  
YASUHITO TANAKA
Keyword(s):  
Labor Supply ◽  
Utility Maximization ◽  
Overlapping Generations ◽  
Monopolistic Competition ◽  
Returns To Scale ◽  
Profit Maximization ◽  
Wage Rigidity ◽  
Overlapping Generations Model ◽  
Involuntary Unemployment ◽  
Constant Returns To Scale

This paper is an attempt to provide a micro-theoretical basis for Keynesian economics while maintaining as much of the neoclassical framework as possible, such as utility maximization for consumers and profit maximization for firms. We show the existence of involuntary unemployment without assuming wage rigidity when labor supplies of individuals are indivisible. We derive involuntary unemployment using an overlapping generations model under monopolistic competition with constant returns to scale technology and indivisible labor supply.

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