Explaining persistent cycles in a short-run context: firms' propensity to invest and omnipotent shareholders

Sebastien Charles

Journal of Post Keynesian Economics, 2010, vol. 32, issue 3, 409-426

Abstract: In this paper, a standard short-run Kaleckian macromodel is developed. The stability of equilibrium is studied and some comparative static exercises are made. The paper then takes into account different specifications for an endogenous propensity to invest and systematically analyze the short-run dynamics of the model. It is shown that when firms' managers adopt abnormal behaviors due to pressures from shareholders regarding the propensity to invest, the system exhibits persistent cycles and chaotic trajectories. The analysis emphasizes that, even in the short run, shareholders may generate instability, which represents a serious threat that should not be underestimated for a capitalist economy.

Keywords: fluctuations; Kaleckian model; propensity to invest (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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