Instability, stationary utilization and effective demand: A structuralist model of endogenous cycles

Christian Schoder

Structural Change and Economic Dynamics, 2014, vol. 30, issue C, 10-29

Abstract: Within the framework of an aggregative macro model with equilibrating output adjustment, Harrodian instability and a constant long-run utilization rate are reconciled with the principle of effective demand by endogenizing the capacity output-capital ratio. As stabilizing forces, distribution and debt dynamics are considered. Introducing non-linearities in the investment function, our model generates limit cycles consistent with empirical observations for the US, i.e. counter-clockwise in the utilization-wage share and utilization-debt space. We argue that with an endogenous capacity-capital ratio the principle of effective demand, the paradox of thrift as well as the paradox of cost may hold despite a constant long-run utilization rate.

Keywords: Harrodian instability; Stationary capacity utilization; Effective demand; Endogenous capacity-capital ratio; Endogenous cycles (search for similar items in EconPapers)
JEL-codes: E12 E22 E32 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:30:y:2014:i:c:p:10-29

DOI: 10.1016/j.strueco.2014.02.001

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