The macroeconomic implications of zero growth: A post-Keynesian approach

Eckhard Hein and Valeria Jimenez

No 169/2021, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: This paper tries to clarify some important aspects around the zero-growth discussion. Starting from an accounting perspective, we analyse the implications of zero growth and clarify the stability conditions of such an economy. This is complemented with a monetary circuit approach - which, like any model, has to respect the national income and financial accounting conventions. The latter allows us to show that a stationary economy, i.e an economy with zero net investment, is compatible with positive profits and interest rates. It is also argued that a stationary economy does not generate systemic financial instability, in the sense of rising or falling financial assets- or financial liabilities-income ratios, if the financial balances of each macroeconomic sector are zero. In order to analyse the dynamic stability of such an economy, we make use of an autonomous demand-led growth model driven by government expenditures. We show that a stable stationary state with zero growth, positive profits, and a positive interest rate is possible. However, the stable adjustment of government expenditure-capital and government debt-capital ratios to their long-run equilibrium values requires specific maxima for the propensity to consume out wealth and for the rate of interest, assuming a balanced government budget and zero retained earnings of the firm sector.

Keywords: Ecological macroeconomics; post-Keynesian economics; stationary-state economics; growth imperative (search for similar items in EconPapers)
JEL-codes: O44 P10 Q01 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-acc, nep-cwa, nep-fdg, nep-hme, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/244396/1/1774590506.pdf (application/pdf)

Related works:
Journal Article: The macroeconomic implications of zero growth: a post-Keynesian approach (2022)
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:zbw:ipewps:1692021

Access Statistics for this paper

More papers in IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().