Endogenous money and inflation: an introductory post-Keynesian/Kaleckian conflict inflation model

Cara Dabrowski and Eckhard Hein

No PKWP2522, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: Based on the notion of endogenous money, which precludes inflation from being a monetary phenomenon, this contribution develops an introductory macroeconomic model of conflict inflation aimed at undergraduate teaching. Our demand-driven model includes Kaleckian mark-up pricing determining firms’ target profit shares, while workers’ target wage shares are determined by institutional features of the labour market and the social benefit system and the employment rate. Conflict inflation emerges if these targets are inconsistent with each other. This basic version of our teachable Kaleckian macroeconomic model incorporates the main components of aggregate demand and their determinants for a closed (private) economy, as well as conflicting income claims between workers and capitalists. The model is then applied in a stylised way to the recent inflationary shocks taking off in 2021. It aims to provide a basic heterodox approach, which is both straightforward and effective in facilitating students’ understanding of inflationary dynamics.

Keywords: conflict inflation; post-Keynesian/Kaleckian model; teaching economics (search for similar items in EconPapers)
JEL-codes: A22 E12 E25 E31 (search for similar items in EconPapers)
Pages: 23
Date: 2025-10
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