Kaleckian Models of Growth in a Coherent Stock-Flow Monetary Framework: A Kaldorian View

Keynesian Theorizing During Hard Times: Stock-Flow Consistent Models as an Unexplored 'Frontier' of Keynesian Macroeconomics

“…31 In fact, Davidson points out that "his own [1965] (…) approach to (…) accumulation (…) involved utilizing (…) the market price of existing real capital relative to the cost of producing real capital (…) as the relevant "invisible hand" ratio directing the entrepreneurial determination of the rate of investment or disinvestment in real capital. This ratio is, of course, the equivalent of the famous q-ratio that Tobin was to discover in 1968" (Lavoie andGodley, 2001-2002, p. 287). Tobin himself (1989a) and Dimsky and Pollin, 1992, p. 37), on the other hand, agree that Minsky's own view about firms' demand for capital goods (e.g.…”

“…As Lavoie andGodley (2001-2002, p. 107-112) remind us, firms have (at least) four "categories of decisions to make," i.e., (i)"they must decide what the mark up on costs is going to be"; (ii) they "must decide (…) how much to produce"; (iii) they must decide "the quantity of capital goods that should be ordered and added to the existing stock of capital k -their investment"; and (iv) "once the investment decision has been taken, firms must decide how it will be financed." Here we will neglect decision (ii), assuming that firms get the point of effective demand "right" 28 .…”

“…One can, therefore, write: Lavoie andGodley, 2001-2002) and (partial adjustment) Harrodian specifications (as in Godley, 1996 and. Note, however, that only the latter is consistent with his more general view according to which "the tendency of the…”

“…None of these authors, however, modelled the determinants of the share of undistributed profits over firms' total after-tax profits. A natural way to proceed, then, is to follow Kaldor (1966) and Lavoie andGodley (2001-2002) Backus et.al. (1980, p. 261) state that "we should not be surprised if current cash-flow, as well as long run calculation of profitability, affects business investment [of liquidity-constrained firms].…”

“…The first is to convince the reader that several Keynesian "schools" of thought converged-around the 1970s-to a broadly similar view of the economic system, one whose analysis actually presupposes the SFCA. We tried to do that (in the long sections 1 and 2) adopting Taylor's (1991Taylor's ( , 2004) structuralist methodology of phrasing the alternative views of Davidson (1972Davidson ( , 1994; Godley (1996, 1999a, Godley and Cripps, 1983andLavoie andGodley, 2001-2002); Minsky (1975Minsky ( , 1986, 1982, and Backus et.al. 1980; as different "closures" of the same (SFC) accounting framework 4,5 .…”