Non-stabilizing Flexibility:From the Contributions By Keynes and Kalecki Towards a Post-Keynesian Approach

Lino Sau

MPRA Paper from University Library of Munich, Germany

Abstract: New and old mainstream macroeconomics argues that price flexibility stabilizes the economy. After a decline in aggregate demand, the more rapid prices fall, the faster output returns to its full employment level. The theoretical basis for this result is the well known "Pigou effect". However both Keynes and Kalecki rejected the thesis that price flexibility, in a demand-induced recession, can be stabilizistabilizing. This paper seeks to contrast Keynes's and Kalecki's ideas with the mainstream and discuss and alternative approach in the spirit of the post-keynesian's debt-deflation school.

Keywords: Non-stabilizing flexibily; Pigou effect: Fisher effect; Debt-deflation (search for similar items in EconPapers)
JEL-codes: E31 E32 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-hpe and nep-mac
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Citations: View citations in EconPapers (1)

Published in Studi Economici 1.88(2006): pp. 79-92

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Journal Article: Non- Stabilizing Flexibility: from the Contributions by Keynes and Kalecki towards a Post-Keynesian Approach (2006)
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