On the (in-)stability and the endogeneity of the "normal" rate of capacity utilisation in a post-Keynesian/Kaleckian "monetary" distribution and growth model

Eckhard Hein

No 02-2006, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: In Kaleckian models of distribution and growth the equilibrium rate of capacity utilisation may persistently diverge from the ‘normal rate’ of utilisation. We assess this problem following the approach by Dumenil/Levy (1999) who consider the ‘normal rate’ of utilisation in a monetary production economy as the rate which is associated with price stability. Since inflation in our model is driven by distribution conflict, the ‘normal rate’ of utilisation is associated with consistent claims of firms and employees. Taking into account real debt effects of changes in inflation and distribution effects of monetary policy interventions we discuss the short-run stability of the ‘normal rate’ and address the issue of long-run endogeneity. Generally, we show that in a Kaleckian monetary distribution and growth model, which takes the major features of a credit economy seriously, the ‘normal rate’ of capacity utilisation is endogenous to distribution conflict and monetary policy intervention in the long run. And we also show that major Kaleckian results, in particular the paradox of costs, can be retained for the short and the long run.

Keywords: distribution; growth; capacity utilisation; inflation; monetary policy (search for similar items in EconPapers)
JEL-codes: E12 E22 E25 E52 O42 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2006-02
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pke
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Citations: View citations in EconPapers (6)

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Related works:
Chapter: On the (In-)stability and the Endogeneity of the Normal Rate of Capacity Utilization in a Post-Keynesian/Kaleckian ‘Monetary’ Distribution and Growth Model (2008)
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