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on Heterodox Microeconomics |
|
Issue of 2020‒10‒26
twenty-one papers chosen by Carlo D’Ippoliti Università degli Studi di Roma “La Sapienza” |
| By: | Jonathan F. Cogliano (University of Massachusetts Boston); Roberto Veneziani (Queen Mary University of London); Naoki Yoshihara (Kochi University of Technology) |
| Abstract: | his article surveys computational approaches to classical-Marxian economics. These approaches include a range of techniques { such as numerical simulations, agent-based models, and Monte Carlo methods { and cover many areas within the classical-Marxian tradition. We focus on three major themes in classical-Marxian economics, namely price and value theory; inequality, exploitation, and classes; and technical change, profitability, growth and cycles. We show that computational methods are particularly well-suited to capture certain key elements of the vision of the classical-Marxian approach and can be fruitfully used to make significant progress in the study of classical-Marxian topics. |
| Keywords: | Computational Methods; Agent-Based Models; Classical Economists; Marx. |
| JEL: | C63 B51 B41 |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:913&r=all |
| By: | Anwar Shaikh (Department of Economics, New School for Social Research); Luiza Nassif Pires (Levy Economics Institute of Bard College); José Alejandro Coronado (Department of Economics, New School for Social Research) |
| Abstract: | Bródy (1997) found that in randomly generated input-output matrices the modulus of the second eigenvalue (relative to the first) falls, hence the convergence speed of an initial vector towards equilibrium increases with matrix size. As the matrix size approached infinity, the convergence approaches a one-step process. On the quantity side, this means that an initial output vector can be transformed into a balanced growth one in a single step. On the price side, this implies that an initial price vector can be transformed into competitive price vector in a single step – in which case Marx’s ‘transformation procedure’ would be exactly correct. Bidard and Schatteman (2001) proved that for random matrices the relative size of all subdominant eigenvalues tends to zero as matrix size approaches infinity. We construct 295 matrices by successive aggregation of the 2002 and 2007 US benchmark matrices, and find that the relative moduli of all subdominant eigenvalues rise with matrix size. Strikingly, the limiting rank-size distribution of the moduli of 2002, 2007 and five additional 1977-1997 benchmark tables approaches a unique power-law function consistent with a Weibull probability distribution of the eigenvalue moduli. These findings do not support Bródy’s conjecture, or the notion of linear limiting Sraffian wage-profit curves, or the Samuelson surrogate (pseudo-)production function. |
| Keywords: | Input-output, wage-profit curves, eigenvalues, aggregate production function |
| JEL: | B51 C67 D46 D57 E11 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2014&r=all |
| By: | Wible, James R.; Assistant, JHET |
| Abstract: | More than a century ago one of the most famous essays ever written in American economics appeared in the Quarterly Journal of Economics, “Why is Economics Not an Evolutionary Science?” There Thorstein Veblen claimed that economics was too dominated by a mechanistic view to address the problems of economic life. Since the world and the economy had come to be viewed from an evolutionary perspective after Darwin, it was rather straight forward to argue that the increasingly abstract mathematical character of economics was non-evolutionary. However, Veblen had studied with a first-rate intellect, Charles Sanders Peirce, attending his elementary logic class. If Peirce had written about the future of economics in 1898, it would have been very different than Veblen’s essay. Peirce could have written that economics should become an evolutionary mathematical science and that much of classical and neoclassical economics could be interpreted from an evolutionary perspective. |
| Date: | 2020–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:5nwsa&r=all |
| By: | Joerg Bibow |
| Abstract: | This paper revisits Keynes's writings from Indian Currency and Finance (1913) to The General Theory (1936) with a focus on financial instability. The analysis reveals Keynes's astute concerns about the stability/fragility of the banking system, especially under deflationary conditions. Keynes's writings during the Great Depression uncover insights into how the Great Depression may have informed his General Theory . Exploring the connection between the experience of the Great Depression and the theoretical framework Keynes presents in The General Theory , the assumption of a constant money stock featuring in that work is central. The analysis underscores the case that The General Theory is not a special case of the (neo-)classical theory that is relevant only to "depression economics"--refuting the interpretation offered by J. R. Hicks (1937) in his seminal paper "Mr. Keynes and the Classics: A Suggested Interpretation." As a scholar of the Great Depression and Federal Reserve chairman at the time of the modern crisis, Ben Bernanke provides an important intellectual bridge between the historical crisis of the 1930s and the modern crisis of 2007-9. The paper concludes that, while policy practice has changed, the "classical" theory Keynes attacked in 1936 remains hegemonic today. The common (mis-)interpretation of The General Theory as depression economics continues to describe the mainstream's failure to engage in relevant monetary economics. |
| Keywords: | John Maynard Keynes; Great Depression; Financial Crises; Central Banks; Interest Rates; Monetary Theory |
| JEL: | B2 B3 E44 E58 E65 G01 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_974&r=all |
| By: | Tanya Broesch (SFU.ca - Simon Fraser University); Alyssa Crittenden (WGU Nevada - University of Nevada [Las Vegas]); Bret A. Beheim (Max Planck Institute for Evolutionary Anthropology); Aaron D. Blackwell (WSU - Washington State University); John Bunce (Max Planck Institute for Evolutionary Anthropology); Heidi Colleran (Max Planck Institute for Evolutionary Anthropology); Kristin Hagel (Max Planck Institute for Evolutionary Anthropology); Michelle Kline (Max Planck Institute for Evolutionary Anthropology); Richard Mcelreath (Max Planck Institute for Evolutionary Anthropology); Robin Nelson (Santa Clara University); Anne Pisor (WSU - Washington State University); Sean Prall (Unknown); Ilaria Pretelli (Unknown); Benjamin Purzycki (Unknown); Elizabeth Quinn (Unknown); Cody Ross (Unknown); Brooke Scelza (Unknown); Kathrine Starkweather (Unknown); Jonathan Stieglitz (IAST - Institute for Advanced Studies in Toulouse); Monique Borgerhoff Mulder (Unknown) |
| Abstract: | The intensifying pace of research based on cross-cultural studies in the social sciences necessitates a discussion of the unique challenges of multi-sited research. Given an increasing demand for social scientists to expand their data collection beyond WEIRD (Western, educated, industrialized, rich and democratic) populations, there is an urgent need for transdisciplinary conversations on the logistical, scientific and ethical considerations inherent to this type of scholarship. As a group of social scientists engaged in cross-cultural research in psychology and anthropology, we hope to guide prospective cross-cultural researchers through some of the complex scientific and ethical challenges involved in such work: (a) study site selection, (b) community involvement and (c) culturally appropriate research methods. We aim to shed light on some of the difficult ethical quandaries of this type of research. Our recommendation emphasizes a community-centred approach, in which the desires of the community regarding research approach and methodology, community involvement, results communication and distribution, and data sharing are held in the highest regard by the researchers. We argue that such considerations are central to scientific rigour and the foundation of the study of human behaviour. |
| Keywords: | cross-cultural research,ethics,evolutionary anthropology,psychology |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02952162&r=all |
| By: | Amavilah, Voxi Heinrich |
| Abstract: | An easy way of observing and predicting changes in the structure and behavior of any freemarket economy is to track changes in its circular flow model of economic activity. Using book titles as a literature review in combinations with a few classics, I describe how the circular flows of free -market economies evolved from little, gentle, and now nearly powerless government role, culminating in superduper capitalism. First the evolution generated great wealth and income, and of late also increasinginequality. Processes like globalization that allowed for econ omic convergence also spurred enormous tensions. The resulting stresses and strains are responsible for unpopular populism and nationalism. The doughnut economic model provides a reasonable framework for explaining what we observe. It shows a decline in the social foundations of human rights, made worse by breaches in the “planetary boundaries” both of which squeeze the livable space ever more tightly like a boa-constrictor suffocating its prey. In this paper I do not go as far as measuring my observations, but the directions for policy and future research have clearly been established. Regarding the latter, one may want to examine how COVID19 has shocked into scurrying towards a delusion of a system that was already slouching towards an illusion. It turns out that the illusion is not a new prediction. In his critique of Marx and rationalization of Kondratieff’s waves (K-waves) Schumpeter predicted that capitalism as an innovation is not immune to the “gale of creative destruction.” |
| Keywords: | Circular flow model, doughnut economic model, social foundations of human rights, inclusive and sustainable development, planetary limits, unpopular populism, super-duper capitalism |
| JEL: | E19 O33 O47 Y90 Z0 |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103263&r=all |
| By: | Villacrés, Lisette; Geenen, Sara |
| Abstract: | Urban renewal policies that aim to “beautify” public space have had unequal impacts, particularly in terms of restricting access to public space for some groups considered to be “undesirable” in the new urban landscape. This paper concentrates on one such group, informal street vendors, who rely on access to the streets for generating an income, and who have been banned or in any case restricted from doing so. In several Latin American cities, street vending is a very important part of the informal economy. We present the case of Guayaquil, Ecuador’s second most populated city, which has undergone a radical urban renewal and gentrification process during the four tenures of former mayor Jaime Nebot (2000 to 2019). This has pushed street vendors further into peripheral areas of the city, and into informality, and has sparked ongoing conflict between street vendors and municipal authorities. Based on a discourse analysis and an analysis of national and local policies and regulations regarding street vending, we argue that street vending has been framed, consecutively, as a symbol of a chaotic past, as an expression of the right to work, and as entrepreneurship. These discourses translated into an array of policies that overall do not allow street vendors to successfully claim their access to public space. For that reason, this paper considers that the right to the city approach could open more transformational political avenues to enhance vendors’ claims over public space by acknowledging two rights: the right to appropriate public space and the right to participate in public decisions in the city. |
| Keywords: | Ecuador; street vending; informal economy; Guayaquil; |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:iob:dpaper:202002&r=all |
| By: | Jérôme Maucourant (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique); Bruno Tinel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | How can we characterize the contradictions between the state and the nation, while taking into account the fact that real society is divided into classes? This paper analyses these elements based on the implications of a full employment policy following Kalecki's analysis. We also find that to articulate the notions of state, nation and social classes it is relevant to examine the idea of a dual nature of the state, of which certain elements are found in Marx. Finally, we address the current challenges of economic policy taking into account the trends that tend to erode the role of the state and nations. |
| Abstract: | Comment caractériser les contradictions entre l'Etat et la nation, tout en prenant en compte le fait que la société réelle est divisée en classes ? Ces éléments sont abordés sous l'angle des implications d'une politique de plein emploi, à partir de l'analyse de Kalecki. Puis, l'idée d'une double nature de l'Etat, dont on trouve des embryons chez Marx, est mobilisée pour articuler les notions d'Etat, de nation et de classes sociales. Enfin on s'interroge sur les enjeux actuels de la politique économique face aux tendances qui sont censées éroder le rôle de l'Etat et des nations. |
| Keywords: | État,nation,Michal Kalecki,classes sociales,politique de plein emploi |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-02955449&r=all |
| By: | Robin Hirsch |
| Abstract: | It is argued that Marxism, being based on contradictions, is an illogical method. More specifically, we present a rejection of Marx's thesis that the rate of profit has a long-term tendency to fall. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.08269&r=all |
| By: | Palma, J. G. |
| Abstract: | The analysis will focus on how the traditional Kindlebergian financial-crisis cycle of “manias, panics and crashes” has been twisted so that now policymakers make sure that any panic is immediately followed by a renewed mania. Due to a “secular-stagnationists”-style thinking, central bankers, treasury officials and politicians - the ‘new alchemists’ - now believe that only a perpetual-mania can deliver some resemblance of growth. So, they persist in pumping liquidity and relaxing monetary conditions, no matter how much this violates every possible principle of markets economics, and regardless of the fact that the current policies to reactivate mature economies (rocketing the net-worth of a few individuals) have already been tried and failed post-2008. One by-product of this new perpetual-mania is that emerging markets have become what I have labelled “the financial markets of last resort”, and commodities “the financial asset of last resort”. That is, most emerging markets now don’t have to put up anymore with international finance being a “sellers” market (where they had to knock and beg); now, it is the international speculator who has been pushed into a yield-chasing frenzy in emerging markets. This new “buyers” market has proved to be a mixed blessing for emerging markets, as many of them have joined the ‘everything rally’ - in which you have nothing to lose but your real economy. |
| Keywords: | manias, panics, financialisation, QE, excess liquidity, ‘disconnect’ between the financial and the real worlds, emerging markets, Latin America, Asia, Keynes, Kindleberger, Minsky, Buchanan |
| JEL: | E22 D70 D81 E24 E51 F02 F21 F32 F40 F44 F63 G15 G20 G28 G30 G38 L51 N20 O16 |
| Date: | 2020–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2094&r=all |
| By: | Caglar Tuncay |
| Abstract: | More than one billion data sampled with different frequencies from several financial instruments were investigated with the aim of testing whether they involve power law. As a result, a known power law with the power exponent around -4 was detected in the empirical distributions of the relative returns. Moreover, a number of new power law behaviors with various power exponents were explored in the same data. Further on, a model based on finite sums over numerous Maxwell-Boltzmann type distribution functions with random (pseudorandom) multipliers in the exponent were proposed to deal with the empirical distributions involving power laws. The results indicate that the proposed model may be universal. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.01199&r=all |
| By: | Krcal, Hans-Christian |
| Abstract: | Within firms diverse fields of action are regarding the transformation of material and immaterial resources. The dimension of choices is being determined by the basic laws of thermodynamics. The entropic relevance of action within a firm has been considered by the paper. From a social system theory perspective the impact of energy flow and its qualities on the decisional opportunity level is being discussed. It can be shown that from the perspective of thermodynamics the threat by equilibrium has some essential consequences for the firm’s decision making in general. |
| Keywords: | thermodynamics; decision making; entropy; steady state and thermodynamic equilibriumclosed and open system; steady state and thermodynamic equilibrium; Thermodynamik; Entropie |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0691&r=all |
| By: | Daniel Serra (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Thanks to the joint collaboration of economics, psychology, and neuroscience from the late 1990s, "neuroeconomics" sheds new light on decision-making analysis. As with any emerging discipline, however, neuroeconomics raises many practical and methodological questions resulting in debates and controversies that this article discusses by addressing three major issues concerning the contribution made so far to knowledge: Is it reliable? Is it scientifically legitimate? Is it useful for the economist? Without claiming to be exhaustive, this analytical framework enables understanding of the thrust of the major criticisms of neuroeconomics and at the same time the nature of the likely responses. |
| Keywords: | Decision-making processes,Neuroscience methods,Brain data,Design of experiments,Economic methodology,Philosophy of science,Computational models,Quantitative research |
| Date: | 2020–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-02956441&r=all |
| By: | Saileshsingh Gunessee (University of Nottingham, Ningbo China); Tom Lane (University of Nottingham, Ningbo China) |
| Abstract: | Traditionally, students of economics have often been told that it is a non-experimental science. Using a quantitative and qualitative analysis of introductory economics textbooks, we track the historical evolution of this rhetoric from 1970 to the present day. We find that anti-experimental rhetoric was dominant and largely unchanged prior to the turn of the 21st century. Since then, there has been a growing trend towards textbooks making positive statements about the role of experimentation in economics. Remarks that experiments are impossible in economics have been (almost) eliminated only this decade, evidencing a sluggish change in rhetoric. We outline the evolution of statements over revised editions of influential textbooks and show that, while most have become considerably more supportive of experimental economics, there is substantial variation over when this happened. Interviews with key textbook authors confirm the historical trend of increased enthusiasm towards experiments, and suggest they are now accepted within the economic mainstream. Our results hold important implications for the research methodology of our science and how it is understood by current and former students. |
| Keywords: | Economic Methodology; Experimental Science; Economics Principles Textbooks; History of Economic Thought |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2020-16&r=all |
| By: | Maarten P. Scholl; Anisoara Calinescu; J. Doyne Farmer |
| Abstract: | Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is like the population of a species. We study a toy model of a market consisting of value investors, trend followers and noise traders. We show that the average returns of strategies are strongly density dependent, i.e. they depend on the wealth invested in each strategy at any given time. In the absence of noise the market would slowly evolve toward an efficient equilibrium, but the large statistical uncertainty in profitability makes this noisy and uncertain. Even in the long term, the market spends extended periods of time far from perfect efficiency. We show how core concepts from ecology, such as the community matrix and food webs, apply to markets. The wealth dynamics of the market ecology explains how market inefficiencies spontaneously occur and gives insight into the origins of excess price volatility and deviations of prices from fundamental values. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.09454&r=all |
| By: | Morley, Julia |
| Abstract: | I develop a framework for assessing the ethical status of social impact bonds (SIBs), drawing on evidence from UK and US SIBs that address recidivism, education, homelessness and healthcare. I extend work on the ethics of markets by Debra Satz to render it suitable for application to SIBs, highlighting informational weaknesses, power imbalances and the generation of harm. Ethical issues observed include the lack of informed consent, denial of care, prioritisation of profit over therapeutic effectiveness and unfair contracting. I find that SIBs are morally permissible in principle but are at great risk of becoming unethical in practice. |
| Keywords: | Ethics; social impact bonds; civil society |
| JEL: | E6 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:100426&r=all |
| By: | Touati, Fatima; Masih, Mansur |
| Abstract: | The objective of this research is to identify the influences between Islamic index in Europe, and its counterpart in Asia, whether the requirement of Shariah (Islamic) compliance of Islamic indexes will tend to get the indexes closer by being influential on each other, or other indexes such as, the conventional regional index and/or conventional interest rate such as LIBOR, will have more influence on the European Islamic index. To answer this question, we applied our study to the following indexes, European Islamic, Asian Islamic, Europe conventional, US conventional, and LIBOR. The standard time series techniques have been employed for the analysis. Our findings tend to indicate that European Islamic index will be influenced more by the movements in LIBOR and conventional markets, rather than the other Islamic indexes. For the policy makers and investors, our results are useful to predict movements of European Islamic index. |
| Keywords: | European Islamic market, conventional market, LIBOR |
| JEL: | C22 C58 G15 |
| Date: | 2018–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102911&r=all |
| By: | Dick Bryan (The University of Sydney); David Harvie (University of Leicester); Mike Rafferty (The University of Sydney); Bruno Tinel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In this chapter, we explore states' strategic use of financial ways of thinking in policy formation, resulting in the "financialization" of many aspects of state policy. Specifically, we argue that, following Randy Martin's formulation, a "social logic of the derivative" is being incorporated into the design of state intervention. Paying particular attention to leverage and liquidity we develop three key propositions, namely, that this derivative logic is changing, and even erasing, earlier distinctions between: (i) the state and financial markets; (ii) those state activities-namely, monetary and fiscal policy-once thought to be formally discrete; and (iii) finance and community or social policy. We illustrate our argument with examples of specific policies and initiatives-such as Quantitative Easing, bank liquidity guarantees, and the social impact bond-drawn primarily from the United States and the United Kingdom. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-02955815&r=all |
| By: | Dasgupta, Utteeyo; Jha, Chandan Kumar; Sarangi, Sudipta |
| Abstract: | Outbreaks of infectious diseases bring behavior and policy responses into sharp focus since societies face acute constraints and uncertainties. This paper compares two infectious disease outbreaks: the Covid-19 pandemic and the 1665 London plague outbreak described by Daniel Defoe in A Journal of the Year of the Plague published in 1722. We compare three aspects: individual behavior, social behavior and governance and find striking similarities in behavior in spite of these events being separated by 350 years. We contend that the same models of behavior can be used to explain human responses during such outbreaks regardless of when they occur. |
| Keywords: | pandemics, infectious diseases, economic behavior, comparative analysis |
| JEL: | A10 B52 Z11 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102956&r=all |
| By: | Bayari, Celal |
| Abstract: | South Korea has had a continuous engagement with significant trade, investment and security matters simultaneously in its relations with other nations. South Korea’s bilateralism with China is a part of a larger milieu which China has been constructing, that includes the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB). South Korea has become a member of the AIIB in December 2015 and it has not joined the BRI. The discussion here also concerns South Korea-China FTA agreement’s aftermath. China is a nation with a very broad range of regional, intraregional and global ambitions and strategies. Undoubtedly, the East Asian security framework has an overbearing impact on the trade and investment environment. Moreover, the relations between Seoul and Pyongyang are relevant to the economic and political developments in East Asia. There are earlier discussions of the structure of the US-South Korea and China-North Korea alliances and there is also prior coverage of the effects of China on North Korean economy and the consequences for South Korea, neither of which will not be recapped here due to lack of space. South Korea, together with the US, Japan, North Korea, China and Russia, has been engaged in a long process of negotiations in several ‘six party talks’ since 2003, to bring a lasting peace to the Korean Peninsula, which have not, as yet, led to a final outcome, as has been the case with the series of the US and North Korean disarmament talks that originated in 1994. While these issues are relevant to the larger context of the topic, in this discussion, the focus is on the South Korean economic model and business systems and its interaction with the Chinese economy and the 2015 FTA and the Chinese business systems. |
| Keywords: | South Korean economy, Chaebols, China, FTA, Belt and Road Initiative, global value chains |
| JEL: | A2 B5 B52 E23 E30 E44 E6 F1 F10 F11 F12 F13 F14 F15 F16 F23 F43 F44 F5 G15 G18 G2 G21 G24 H1 H13 H5 H54 H77 J2 J21 J24 J31 J42 K2 K21 K23 L1 L11 L12 L13 L14 L16 M1 M13 O11 O14 O15 O19 P1 P12 P13 P16 P2 P23 P31 P32 P33 P36 P37 |
| Date: | 2020–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102938&r=all |
| By: | Brian Hartley (Department of Economics, New School for Social Research) |
| Abstract: | To assess the conditional stability properties of the Kaleckian growth framework in the mediumrun, we investigate behavioral corridors where investment will be unresponsive to departures of actual from desired utilization rates - thus providing for the episodic incidence of Harrodian instability. We empirically assess this relationship using two-state Markov-Switching Structural Vector Auto-Regression t on non-residential xed investment and the rate of capacity utilization for the United States. To directly assess the relevance of a behavioral corridor for the cyclical dynamics of the endogenous variables, the probabilities governing the transition between hidden states are modelled as a time-varying function of gap between realized utilization rates and their long-run average. Results suggest the response of investment to structural utilization shocks is highly regime-dependent and predominantly occurs during business cycle downturns. |
| Keywords: | Kaleckian Growth Model, Growth and Distribution, Harrodian Instability, Hidden Markov Models, Structural Vector Auto-Regression, Bayesian Econometrics |
| JEL: | B50 C11 E11 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2013&r=all |