Corridor stability of the Kaleckian growth model: a Markov-switching approach
Brian Hartley ()
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Brian Hartley: Department of Economics, New School for Social Research
No 2013, Working Papers from New School for Social Research, Department of Economics
To assess the conditional stability properties of the Kaleckian growth framework in the mediumrun, we investigate behavioral corridors where investment will be unresponsive to departures of actual from desired utilization rates - thus providing for the episodic incidence of Harrodian instability. We empirically assess this relationship using two-state Markov-Switching Structural Vector Auto-Regression t on non-residential xed investment and the rate of capacity utilization for the United States. To directly assess the relevance of a behavioral corridor for the cyclical dynamics of the endogenous variables, the probabilities governing the transition between hidden states are modelled as a time-varying function of gap between realized utilization rates and their long-run average. Results suggest the response of investment to structural utilization shocks is highly regime-dependent and predominantly occurs during business cycle downturns.
Keywords: Kaleckian Growth Model; Growth and Distribution; Harrodian Instability; Hidden Markov Models; Structural Vector Auto-Regression; Bayesian Econometrics (search for similar items in EconPapers)
JEL-codes: B50 C11 E11 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2020-10, Revised 2020-11
New Economics Papers: this item is included in nep-hme, nep-mac, nep-ore and nep-pke
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