Nonlinear Dynamics of Debt and Capital: A Post-Keynesian Analysis

Asada, Toichiro

doi:10.1007/978-4-431-67903-5_6

Cited by 33 publications

(43 citation statements)

References 18 publications

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“…Consequently, several different models purporting to summarise his argument have been proposed (e.g. Skott 1994, Asada 2001, Fazzari et al 2008, Charles 2008). However, the basic structure of the argument for our purposes is clear enough.…”

Section: A Minsky Cyclementioning

confidence: 99%

“…This is because the degree of indebtedness of firms makes them vulnerable to bankruptcy once interest rates rise and/or a larger share of cash flows is absorbed by debt services, which negatively impacts on investment. Skott (1994), Asada (2001), Fazzari et al (2008), and Charles (2008) derive such models from behavioural functions and discuss them further.…”

Section: ̇ (4)mentioning

confidence: 99%

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Pseudo-Goodwin cycles in a Minsky model

Stockhammer¹,

Michell²

2016

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Goodwin cycles result from the dynamic interaction between a profit-led demand regime and a reserve army effect in income distribution. The paper proposes the concept of a pseudo-Goodwin cycle. We define this as a counter-clockwise movement in output and wage share space which is not generated by the usual Goodwin mechanism. In particular, it does not depend on a profit-led demand regime. To illustrate this, a simple Minsky-type model is extended by a reserve army distribution adjustment. In this model the cycle is generated by the interaction of financial fragility and demand. The wage share rises at higher levels of output but this generates no feedback so that, by design, demand does not react to changes in income distribution. But the model does exhibit a pseudo-Goodwin cycle in the output-wage share space. This holds true even if we introduce a wage-led demand regime. This demonstrates that the existence of a counter-clockwise movement of output and the wage share cannot be regarded as proof of the existence of a Goodwin cycle and a profit-led demand regime.

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Section: A Minsky Cyclementioning

confidence: 99%

Section: ̇ (4)mentioning

confidence: 99%

Pseudo-Goodwin cycles in a Minsky model

Stockhammer¹,

Michell²

2016

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“…Minsky models have at their core a financial cycle that operates either through the indebtedness of business or households or, in some versions, an asset price cycle. Most of the research on these models so far is theoretical (Keen 1995;Asada 2001;Charles 2008;Fazzari et al 2008;Ryoo 2013). There are few empirical tests of these models yet, and the relation to the Kaleckian literature is not usually made explicit, despite Minsky's own building on Kalecki and the sympathy of most Minskyans.…”

Section: The Relative Size Of Distributional and Financial Effectsmentioning

confidence: 99%

Untitled

2017

ROKE

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The Bhaduri-Marglin model has become a widely used workhorse model in heterodox macroeconomics and has given rise to two dozen or so empirical studies, which at times have given conflicting results. Neo-Kaleckians and neo-Goodwinians have applied different estimation strategies, with the former typically estimating behavioural equations, while the latter have often used reduced-form demand equations. Further differences include the lag structure, the output measure, the control variables and the sample. This paper, first, tries to clarify the terms of the debate. While neo-Kaleckians interpret the model as a mediumterm, partial-equilibrium goods market model, neo-Goodwinians are interested in the interaction of demand and distribution and regard the model as a long-run model with short-run cycles. Second, we elaborate a Kaleckian-Minskyan view of the economy as characterised by a wage-led demand regime and cycles driven by financial fragility. Many of the reported results may suffer from omitted variable bias as they do not include financial control variables. At least in the recent past, financial effects on demand have been much larger in size than distribution effects. A wage-led Minsky model with a reserve-army distribution function gives rise to pseudo-Goodwin cycles.

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“…Section 7 is devoted to some concluding remarks. Sections 3 and 4 are in fact restatements of the author's previous papers (Asada 2001 and2004). Availability of these papers is limited among non-Japanese scholars, although these papers are written in English.…”

Section: Introductionmentioning

confidence: 99%

“…In section 2, we restate Minsky's financial instability hypothesis by referring to Minsky's own writings. In section 3, we interpret Asada's (2001) very simple fixed price dynamic model which is expressed by a Lotka-Volterra type two-dimensional system of nonlinear differential equations, which can reflect Minsky's perspective of a financially driven business cycle called ›Minsky cycle‹. In section 4, we interpret the extended three-dimensional model by introducing price flexibility following Asada's (2004) procedure, and show that the increase of price flexibility tends to destabilize rather than stabilize the macroeconomic system in this model contrary to the teaching of the mainstream macroeconomics.…”

Section: Introductionmentioning

confidence: 99%