Taking Godley's Ratios Seriously

Fabrício Pitombo Leite

Metroeconomica, 2015, vol. 66, issue 3, 508-533

Abstract: type="main">

This article derives the three ratios employed by Wynne Godley to argue that they can express a full stock-flow consistent model. The strategy adopted here intends to explain the theoretical consequences of including the stock of wealth in a basic Keynesian scheme. It is demonstrated that the same steady-state level of income emerges whether we treat private investment as an exogenous variable or we treat it as totally endogenous. It is also demonstrated that stability conditions and the possible patterns of a path approaching this steady-state level can be examined before simulations.

Date: 2015
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