Unemployment, income distribution and debt-financed investment in a growth cycle model

Sordi, Serena; Vercelli, Alessandro

doi:10.1016/j.jedc.2014.09.030

Cited by 37 publications

(10 citation statements)

References 21 publications

(21 reference statements)

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“…33 22 For the presentation of the Goodwin cycles and the combination of Goodwin's model with Minskyan dynamics see Keen (1995), Grasselli and Costa Lima (2012), Sordi and Vercelli (2014) and Stockhammer and Michell (2017). Responsiveness of the private sector's desired propensity to spend to the gap between the target and the actual debt ratio τ Taxes-to-output ratio…”

Section: Discussionmentioning

confidence: 99%

Debt cycles, instability and fiscal rules: a Godley–Minsky synthesis

Dafermos

2017

Cambridge Journal of Economics

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were two macroeconomists who 'saw the crisis coming'. This paper develops a simple macrodynamic model that synthesises some key perspectives of their analytical frameworks. The model incorporates Godley's financial balances approach and postulates that private sector's propensity to spend is driven by a stock-flow norm (the target net private debt-to-income ratio) that changes endogenously via a Minsky mechanism. It also includes two fiscal rules: a Maastricht-type fiscal rule, according to which the fiscal authorities adjust the government expenditures based on a target net government debt ratio; and a Godley-Minsky fiscal rule, which links government expenditures with private indebtedness following a counter-cyclical logic. The analysis shows that (i) the interaction between the propensity to spend and net private indebtedness can generate cycles and instability; (ii) instability is more likely when the propensity to spend responds strongly to deviations from the stock-flow norm and when the expectations that determine the stock-flow norm are highly sensitive to the economic cycle; (iii) the Maastricht-type fiscal rule is destabilising while the Godley-Minsky fiscal rule is stabilising; (iv) the paradox of debt can apply both to the private sector and the government sector.

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Section: Discussionmentioning

confidence: 99%

Debt cycles, instability and fiscal rules: a Godley–Minsky synthesis

Dafermos

2017

Cambridge Journal of Economics

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“…Since then, many improvements and discussion have been introduced (see Desai [4] , Gandolfo [7] , Goodwin [9] and Wolfstetter [31] ). The Goodwin model can be represented as follows (Desai et al [5] ; Sordi and Vercelli [28] )…”

Section: From Continuous To Discrete Dynamics -The Modelmentioning

confidence: 99%

A dynamically consistent discretization method for Goodwin model

Grassetti

Guzowska

Michetti

2020

Chaos, Solitons & Fractals

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In economic theory the majority of macroeconomic models describing economic growth employ differential equations or sets of differential equations (see, among all, Solow, 1956 andHaavelmo, 1954). Nevertheless, economic data are usually available in discrete time. Therefore, when attempting to apply these models it is often necessary to use their discrete form, i.e. difference equations. To this aim, more and more often authors propose and analyse discrete versions of the models originally built with the assumption of time continuity. Despite many standard numeric techniques and ready-made software, obtained discrete models do not always maintain model characteristics in continuous time and the long run behaviours of the discretized model could differ from the original one. In this work, we present a modification of non-standard discretization method related to the methodology proposed by Mickens (20 0 0), (20 03) and its revisions (see Kwessi et al., 2018) for converting economic models from continuous time to discrete time. Such a discretization method preserves the original dynamic properties of the continuous model, in the sense of equilibria, their stability and bifurcation characteristics. Furthermore, the discretization produces solution trajectories in qualitative and quantitative agreement with those of the continuous model. An example of economic model described by a system of nonlinear differential equations is studied: we applied the discretization method to the Goodwin model (Goodwin, 1967) and provided a comparative analysis for qualitative and quantitative long run behaviour of the continuous and discrete version of the system.

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“…Keen (2013) extends the model described above by including an explicit banking sector, endogenous money creation and a more explicit financial structure based on the SFC approach. Sordi and Vercelli (2014) argue that Keen (1995) does not take into account that the goods market may be in a disequilibrium and they use an output adjustment mechanism. They propose a model based on Goodwin (1951) flexible accelerator.…”

Section: Goodwin-minsky Modelsmentioning

confidence: 99%

Minsky Models: A Structured Survey

Nikolaidi¹,

Stockhammer²

2018

Analytical Political Economy

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Minsky's ideas have recently gained prominence in the mainstream as well as in the heterodox literature. However, there exists no agreement upon the formal presentation of Minsky's insights. The aim of this paper is to survey the literature and identify differences and similarities in the ways through which Minskyan ideas have been formalised. We distinguish between the models that focus on the dynamics of debt or interest, with no or a secondary role for asset prices, and the models in which asset prices play a key role in the dynamic behaviour of the economy. Within the first category of models we make a classification between (i) the Kalecki-Minsky models, (ii) the Kaldor-Minsky models, (iii) the Goodwin-Minsky models, (iv) the credit rationing Minsky models, (v) the endogenous target debt ratio models and (vi) the Minsky-Veblen models. Within the second category of models, we distinguish between (i) the equity price Minsky models and (ii) the real estate price Minsky models. Key limitations of the models and directions for future research are outlined.

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Unemployment, income distribution and debt-financed investment in a growth cycle model

Cited by 37 publications

References 21 publications

Debt cycles, instability and fiscal rules: a Godley–Minsky synthesis

Debt cycles, instability and fiscal rules: a Godley–Minsky synthesis

A dynamically consistent discretization method for Goodwin model

Minsky Models: A Structured Survey

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