Animal spirits and unemployment: a disequilibrium analysis

Robert Calvert Jump

Journal of Economic Interaction and Coordination, 2014, vol. 9, issue 2, 255-274

Abstract: The past decade has seen a number of advances in modelling disequilibrium dynamics. This paper draws on separate approaches to disequilibrium dynamics to demonstrate a Keynesian result concerning the formal relevance of “animal spirits” in production economies. Specifically, it is shown that a parameter that can be associated with the “animal spirits” of firms is crucial to the stability of full employment equilibrium in a production economy. This approach to “animal spirits” is different to that taken by recent New Keynesian DSGE-type models, but similar in spirit to “Old Keynesian” approaches, including that of the General Theory. The corollary of the main conclusion is that price flexibility is not a sufficient condition for convergence on full employment equilibrium. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Disequilibrium dynamics; Animal spirits; Unemployment; C63; D50; D51; E24 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11403-014-0134-4

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