Pseudo-Goodwin cycles in a Minsky model

Engelbert Stockhammer and Jo Michell

No PKWP1405, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: 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. As a demonstration, a simple Minsky model is extended by adding a reserve army distribution adjustment mechanism. The wage share responds positively to output but generates no feedback. In the augmented Minsky model, cycles are generated purely through the interaction between financial fragility and demand. By design, demand is not influenced by changes in income distribution. But the model does exhibit a pseudo-Goodwin cycle in the output-wage share space. This holds true even if a wage-led demand regime is introduced. 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.

Keywords: Business cycles; Goodwin cycle; Minsky cycle; financial fragility; distribution cycles; Post Keynesian economics (search for similar items in EconPapers)
JEL-codes: E11 E12 E32 (search for similar items in EconPapers)
Pages: 30
Date: 2014-05
New Economics Papers: this item is included in nep-hme, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
https://postkeynesian.net/media/working-papers/PKWP1405.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: Pseudo-Goodwin cycles in a Minsky model (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pke:wpaper:pkwp1405

Access Statistics for this paper

More papers in Working Papers from Post Keynesian Economics Society (PKES) Contact information at EDIRC.
Bibliographic data for series maintained by Jo Michell ().