The Mechanism of Recovery in Fixed Investment

Ichiro Takahashi
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Ichiro Takahashi: Chuo University

Chapter Chapter 7 in An Artificial Wicksell—Keynes Macroeconomy, 2021, pp 111-122 from Springer

Abstract: Abstract This chapter highlights a mechanism by which a downward long-term trend reverses its direction to stabilize the baseline economy. Section 7.1 overviews two negative feedback loops that influence the degree of stability: investment loop and employment loop. Section 7.2 examines equilibrating forces that work in the former loop. Section 7.3 elaborates two stabilizing forces of a Walrasian firm in the latter loop: expansion of aggregate employment and its indirect effect on an individual firm’s switching behavior between Walrasian and Keynesian types. Section 7.4 combines these forces to reveal a mechanism of restoring employment and investment.

Date: 2021
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DOI: 10.1007/978-981-16-6839-5_7

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