Finance, inflation and employment: a post-Keynesian/Kaleckian analysis

Georgios Argitis and Yannis Dafermos

Cambridge Journal of Economics, 2011, vol. 35, issue 6, 1015-1033

Abstract: The purpose of this paper is to contribute to the post-Keynesian/Kaleckian macroeconomic literature. We develop a macroeconomic model that explicitly integrates the role of borrowing and cash payment commitments on outstanding debt (interest plus principal repayment) into the consumption and investment expenditures, as well as into the inflation-generating process. We explore the way that finance influences the distribution effects of inflation in the demand-side of a money/credit-using economy; we suggest a new Phillips curve that encapsulates the impact of financial commitments on wage and profit claims. We argue that high debt and cash payment commitments are likely to be associated with a positive demand-side effect of inflation on the rate of employment; and that they might be conducive to a negative supply-side effect of employment on the inflation rate. Copyright The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Date: 2011
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