Credit-Driven Investment, Heterogeneous Labor Markets and Macroeconomic Dynamics
Hans-Martin Krolzig (),
Willi Semmler () and
Additional contact information
Peter Flaschel: Bielefeld University
Christian Proaño: Department of Economics, New School for Social Research
No 1301, Working Papers from New School for Social Research, Department of Economics
In this paper we set up a baseline, but nevertheless advanced and complete model rep-resenting detailed goods market dynamics, heterogeneous labor markets, dual and cross-dual wage-price adjustment processes, as well as counter-cyclical government policies. The cyclical movements of output generates, through Okun's law, employment variations in the heterogeneous labor market. The core of the resulting Keynesian macrodynamics is however given by credit-financed investment behavior and loan-rate setting by credit suppliers. The framework is constructed in such way that simplied, lower dimensional versions of the model can be obtained by setting parameters describing specific feedback effects from one sector to another equal to zero. Starting from such low dimensional sub-dynamics, we show the local stability of the full 7D model through a "cascade of stable matrices" approach if the feedback chains are sufficiently tranquil in their trans-mission mechanisms. However, local stability is the point of departure for the numerical investigation of local explosiveness and the forces that can bound such a behavior.
Keywords: Macroeconomic (In-)Stability; Segmented Labor Markets; Business Cycles; Fiscal and Monetary Policy Rules (search for similar items in EconPapers)
JEL-codes: E12 E24 E31 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pke
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.economicpolicyresearch.org/econ/2013/NSSR_WP_012013.pdf First version, 2013 (application/pdf)
Journal Article: Credit-driven investment, heterogeneous labor markets and macroeconomic dynamics (2015)
Working Paper: Credit Driven Investment, Heterogeneous Labor Markets and Macroeconomic Dynamics (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:1301
Access Statistics for this paper
More papers in Working Papers from New School for Social Research, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mark Setterfield (). This e-mail address is bad, please contact .