Demand regimes, financialisation and hysteresis. New Keynesian and post-Keynesian macroeconomic underpinnings of the Varieties of Capitalism

Engelbert Stockhammer

No PKWP1809, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: The recent integration of post-Keynesian insights into Comparative Political Economy is an exciting development. Post-Keynesian theory differs from neoclassical and Marxist theories in its analysis of the role of income distribution and of finance. It allows for wage-led demand regimes and it regards finance to be endogenously created and a source of instability. The paper contributes to the debate on the integration of demand regimes in the Varieties of Capitalism analyses. It contrasts post-Keynesian theory to the New Keynesian three equation model. It highlights that post-Keynesian theory gives prominence to the role of income distribution and allows for wage-led demand regimes; financial variables play a key role, which gives rise to endogenous instability and financial cycles (Minskyan debt cycles); economic growth is regarded as a path dependent process (with unemployment hysteresis due to wage norms) and is not anchored in a supply side equilibrium. However, PKE has so far mostly provided a normative analysis of government interventions. The ability to generate income and wealth rather than competitiveness is regarded as key criteria for a viable variety of capitalism.

Keywords: Varieties of Capitalism; post-Keynesian economics; financialisation (search for similar items in EconPapers)
JEL-codes: E02 E12 P50 (search for similar items in EconPapers)
Pages: 16
Date: 2018-10
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac, nep-mon and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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