Animal Spirits and the Goodwin Pattern

Mark Setterfield and George Wheaton

Metroeconomica, 2026, vol. 77, issue 1, 2-16

Abstract: The Goodwin pattern is an established stylized fact of capitalist macrodynamics. Existing models typically assume profit‐led real‐sector dynamics and a ‘reserve army’ mechanism in order to reproduce this pattern. We extend an animal‐spirits‐driven business cycle model, in which the demand regime is wage‐led, by adding a reserve army effect determining real wage dynamics. We construct an agent‐based simulation of the model, showing that we are able to reproduce the Goodwin pattern. Our results add to the literature suggesting that the Goodwin pattern can arise from various macrodynamic ensembles—including some that feature wage‐led real sectors.

Date: 2026
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https://doi.org/10.1111/meca.12506

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Working Paper: Animal spirits and the Goodwin pattern (2024)
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