Gangolf Groh

Towards Applied Disequilibrium Growth Theory: VI. Substitution, Money-Holdings, Wealth-Effects and Further Extensions

In this paper we present a theoretical disequilibrium growth model of an open economy with a full set of markets and sectors and with heterogeneous agents in the household sector. This model allows, on the one hand, for basic consistency checks, such as fully specified bedget identities and a well-defined steady state refernce path and is therefore carefully specified from the theoretical point of view. On the other hand, the model is already fairly close to applied modern structural model building and thus is rich in descriptive detail. The model exhibits five real and five financial markets. Consumption behavior is formulated by way of the life cycle hypothesis and savings of worker households are allocated to money and short-term bonds, while savings of pure asset holders concern all financial assets considered (equities and long-term bonds, domestic and foreign ones). Firms use three inputs (labor, capital and imports) to produce two outputs (domestic goods and export commodities) by way of a nested CES/CET technology and they produce in a cost-minimizing way subject to a domestic demand constraint, also formulating medium run targets that guide their investment and pricing decision. The government sector is described in a very detailed way, including a variety of taxation schemes in particular and also a debt target according to which taxes are adjusted. We consider sluggishly adjusting wages and prices, coupled with heterogeneous expectations formation, and have on this basis fluctuating rates of capacity utilization on the labor market as well as on the market for goods. Financial markets, finally, are described by delayed adjustment processes towards interest rate parity conditions. The paper itself presents only the extensive form of the model with all of its details and compares it to the Murphy model for the Australian economy and also with the Multimod model, Mark III of the IMF. In subsequent papers we derive the intensive form of the model, its interior steady state solution and a 22 dimensional core dynamics which is then investigated from the theoretical and the numerical point of view, concerning the major feedback loops it contains and the stabilizing or destabilizing implications they give rise to. The main perspective of our work is to contribute to a better theoretical underpinning and understanding of modern applied macrodynamic models which nowadays also attempt to be complete with respect to budget identities and steady state reference paths, but which have not yet fully grasped the stability implications of their model buildings and basically have not yet included heterogeneity with respect to households and expectations formation.

Präkeynesianische Makroökonomik. Darstellung und Kritik

Ziel dieses Abschnitts ist es, an einem Beispiel und darauf aufbauenden theoretischen Erorterungen zu belegen, dass heutige Massenarbeitslosigkeit nicht rein arbeitsmarkttheoretisch analysiert werden kann, sondern dass ihre Ursache in der Interdependenz der fundamentalen Markte der Makrotheorie zu suchen ist.

Keynesianische Beschäftigungstheorie: Die kurze Sicht

Wir haben im letzten Abschnitt des vorausgegangenen Kapitels gesehen, wie sich ein Makromodell mit walrasianischen Nachfragefunktionen darstellt und bei voller Lohn- und Preisflexibilitat zur Bestimmung der Preise w0; p0 und des Zinssatzes r0 bei allgemeinem Gleichgewicht genutzt werden kann. Wie wir gesehen haben, gibt es (neuklassische) Makrookonomen, die alle Fragen der Makrotheorie in diesem Rahmen abgehandelt sehen wollen. Wir wollen jedoch hier zur Keynes’schen Theorie zuruckkehren und fragen, wie ein solches Modell reformuliert werden muss, wenn man erneut davon ausgeht, dass die Nominallohne \( \bar w \) (und das Preisniveau) in der kurzen Sicht fixiert und damit exogen gegeben sind. Erklarungen der Nominallohnbestimmung werden im nachsten Kapitel betrachtet werden, das sich mit Fragen der mittleren Sicht befassen wird. Und die lange Frist, also insbesondere die explizite Behandlung der Veranderungen \( \dot K \) des Kapitalstocks K, wird im darauffolgenden Kapital erfolgen.

Keynesianische Inflationstheorie: Die mittlere Sicht

Wahrend wir im ersten Teil dieses Buches die Analyse und Schlussfolgerungen bzgl. der Funktionsweise einer modernen Volkswirtschaft und der Konsequenzen von Geld- und Fiskalpolitik in der kurzen Frist darstellten, ist unser Ziel in diesem zweiten Teil eine ausfuhrliche und konsistente Darstellung dieser Zusammenhange fur die mittlere Frist zu liefern.

Multiple-Choice Klausuraufgaben

Diese Klausur basiert auf dem Lehrbuch ‘Keynesianische Makrookonomik. Unterbesch aftigung, Inflation und Wachstum’ der Autoren dieses Beitrags (erste Auflage). In diesem Lehrbuch wird das kurzfristige IS-LM-Modell der konventionellen Lehrbuchliteratur in der einfachen linearen Form, wie es z. B. in Dornbusch/Fischer (1995) breit dargestellt ist, und ohne Bruch als Basis der Analyse der mittleren und der langen Frist herangezogen und entsprechend weiterentwickelt.

Keynesianische Wachstumstheorie: Die lange Sicht

Bevor wir in diesem Kapitel zu einer Integration von Wachstumsaspekten in die keynesianische IS-LM-PC Analyse ubergehen werden, wollen wir in diesem Abschnitt zwei keynesianisch orientierte wachstumstheoretische Ansatze betrachten, die im Gefolge und auf Basis der Keynes’schen Theorie des temporaren Gleichgewichts (der Multiplikatortheorie) entstanden sind, die Instabilitatsanalyse kapitalistischer Wachstumsprozesse von Harrod (1939) und den stagnationstheoretischen Ansatz von Domar (1946). Diese Ansatze werden anschliesend mit dem sog. neoklassischen Wachstumsmodell konfrontiert werden, welches von Solow (1956) als Kritik des Harrodschen Ansatzes konzipiert worden war. Wir werden sehen, dass diese Kritik Solows nicht gut fundiert ist, da sein Modell anstelle des Keynes’schen Multiplikatorprozesses der Bestimmung von Einkommen und Produktion (auf Basis gegebenen Investitionsverhaltens) wieder zum Sayschen Gesetz (bei Vollbeschaftigung des Faktors Arbeit) zuruckkehrt und damit eine keynesianische Analyse von Wachstum und Stabilitat qua Annahme einfach ausblendet.

Market Imperfections: Basic Integration and Comparison

Whereas the non-Walrasian approaches considered in the preceding chapter were mainly concerned with a correct description of short-run rationing equilibria on the basis of temporarily given wages and prices, they usually left open the question, how these wages and prices are actually formed and why they are temporarily fixed. Partly as a reaction to this unsatisfactory situation a large number of theories emerged, that tried to give some foundation for these assumptions by explicit consideration of imperfections on the markets for labor or for goods (or both) . Although theories of price formation under imperfect competition on the one hand and macroeconomic models based on price setting or non-market clearing prices both have a long tradition, attempts to integrate both lines have occupied a larger part in economic literature only recently during recent decades. They resulted in a variety of mainly microfounded models of general equilibrium, in which prices were derived from optimizing behavior of agents endowed with some market power. In the following some of these approaches1 shall be briefly sketched, because they provide the background for the aggregative equations employed by Carlin and Soskice (1990) in their basic imperfect competition model, that will later be integrated into the KMG framework. As one main element of the latter is the existence of involuntary unemployment, the question arises, how the non-market-clearing wages, which are mainly responsible for this, are generated. On the other hand, the formation of the prices for goods plays an important role when judging the potential effect of changes of aggregate demand on output.

Disequilibrium, Growth and Labor Market Dynamics: Foundations

This chapter introduces the basic partial components of what in chapter 3 will become our integrated model of nominal adjustment processes, goods market disequilibrium dynamics, and growth and labor market dynamics. First, we consider the Keynesian analysis of the interaction of Keynes- and Mundell-effects by way of a proper formulation of IS-LM-PC analysis, where short-run goods and money market equilibrium is coupled with medium run sluggish wage adjustment by way of a money wage Phillips curve (the PC component), markup pricing and adaptively formed inflationary expectations. Second, the treatment of goods market disequilibrium and of sluggish quantity adjustment processes is introduced by way of a Metzlerian inventory adjustment mechanism that is closely related in its formal features to the dynamics generated by the classic Kaldorian model of the trade cycle. Third, the interaction of growth and income distribution is presented in an intuitive way referring to Goodwin’s growth cycle model and extended in various ways, in particular by the consideration of nominal debt deflation in such a growth context. Integration of these three aspects of disequilibrium, growth and labor market dynamics thus gives rise to a model of Keynes-Metzler-Goodwin, or briefly KMG type, which will be introduced and investigated in its basic format in chapter 3.

Introduction: Integrated Macrodynamics

This book is about labor market dynamics and the macroeconomy and it continues the work by Flaschel, Franke and Semmler (1997) and Chiarella and Flaschel (1999b) on monetary macrodynamics and the macro foundations of Keynesian monetary growth. We extend a short-run Keynesian oriented monetary framework to include wage-price dynamics and economic growth because these are important factors affecting the medium- and long-run performance of the labor market. The term disequilibrium in the title refers to non-market clearing situations, namely to the fact that markets, specifically product or labor markets are not cleared at each instant of time. This requires a study of out-of-equilibrium dynamics and resulting feedback chains and other adjustment mechanisms of the economy. We do not consider microeconomic issues, economic policy and econometric issues here, since the book is mainly on extending integrated macrodynamic modeling with particular stress on the labor market. Microeconomic issues are however more or less implicitly present due to the theoretical history of the structural equations used (see in particular part III) and should receive further attention in future reconsiderations of the work here presented. Macroeconometric model building and policy issues are the perspective of the book, and thus will be addressed in future work by the authors, by extending the foundations laid for this type of analysis in part III of the book.

AS-AD Disequilibrium Dynamics and Economic Growth

The paper reconsiders models of AS-AD growth from a disequilibrium perspective which in fact is easier to treat than AS-AD which admits disequilibrium in the labor market but not in the product market. We assume sluggish wage and price adjustments and a Metzlerian inventory dynamics. We obtain fluctuating rates of capacity utilization for both labor and capital. For exogenous productivity growth, the model implies six laws of motion. Stability, proved for sluggish adjustment speeds, gets lost through Hopf-bifurcations, implying the existence of attracting or repelling periodic motions close to such bifurcation values. We show that these results remain valid for endogenous growth, with new features concerning the production of technological change (which is subject to hysteresis).