Aggregate demand, instability, and growth

Steven Fazzari, Pietro E. Ferri, Edward G. Greenberg and Anna Maria Variato
Additional contact information
Pietro E. Ferri: University of Bergamo
Edward G. Greenberg: Washington University
Anna Maria Variato: University of Bergamo

Review of Keynesian Economics, 2013, vol. 1, issue 1, 1-21

Abstract: This paper considers a puzzle in growth theory from a Keynesian perspective. If neither wage and price adjustment nor monetary policy are effective at stimulating demand, no endogenous dynamic process exists to assure that demand grows fast enough to employ a growing labor force. Yet output grows persistently over long periods, occasionally reaching approximate full employment. We resolve this puzzle by invoking Harrod's instability results. Demand grows because it follows an explosive upward path that is ultimately limited by resource constraints. Downward demand instability is contained by introducing an autonomous component to aggregate demand.

Keywords: economic growth; instability; aggregate demand; floors and ceilings (search for similar items in EconPapers)
JEL-codes: E12 E32 O40 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.elgaronline.com/view/journals/roke/1-1/roke.2013.01.01.xml (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:1:y:2013:i:1:p1-21

Access Statistics for this article

Review of Keynesian Economics is currently edited by Thomas Palley, Matías Vernengo and Esteban Pérez Caldentey

More articles in Review of Keynesian Economics from Edward Elgar Publishing
Bibliographic data for series maintained by Phillip Thompson ().