This paper follows van der Ploeg (Metroeconomica 37(2):221–230, 1985)’s research program in testing both its extension of Goodwin (in: Feinstein (ed) Socialism, capitalism and economic growth, Cambridge University Press, Cambridge, 4, 54–58, 1967) predator–prey model and the Minsky Financial Instability Hypothesis (FIH) proposed by Keen (J Post Keynes Econ 17(4):607–635, 1995). By endowing the production sector with CES technology rather than Leontief, van der Ploeg showed that the possible substitution between capital and labor transforms the close orbit into a stable focus. Furthermore, Keen (1995)’s model relaxed the assumption that profit is equal to investment by introducing a nonlinear investment function. His aim was to incorporate Minsky’s insights concerning the role of debt finance. The primary goal of this paper is to incorporate additional properties, inspired by van der Ploeg’s framework, into Keen’s model. Additionally, we outline possibilities for production technology that could be considered within this research program. Using numerical techniques, we show that our new model keeps the desirable properties of Keen’s model. However, we also demonstrate that when the economy is endowed with a class of CES production function that includes the Cobb–Douglas and the linear technology as limit cases, the unique stable equilibrium is an economically desirable one. Finally, we propose a modified extension that includes speculative component in the economy as in Grasselli and Costa-Lima (Math Financ Econ 6(3):191–210, 2012) and investigate its effect on the dynamics. We conclude that CES production function is a more suitable assumption for empirical purposes than the Leontief counterpart. Finally, we show, using numerical simulations, that under plausible calibration, the model endowed with CES production function eventually lose the cyclical property of Goodwin’s model with and without the speculative component.
Minskyan classical growth cycles: stability analysis of a stock-flow consistent macrodynamic model
Résumé
en
This paper follows van der Ploeg (Metroeconomica 37(2):221–230, 1985)’s research program in testing both its extension of Goodwin (in: Feinstein (ed) Socialism, capitalism and economic growth, Cambridge University Press, Cambridge, 4, 54–58, 1967) predator–prey model and the Minsky Financial Instability Hypothesis (FIH) proposed by Keen (J Post Keynes Econ 17(4):607–635, 1995). By endowing the production sector with CES technology rather than Leontief, van der Ploeg showed that the possible substitution between capital and labor transforms the close orbit into a stable focus. Furthermore, Keen (1995)’s model relaxed the assumption that profit is equal to investment by introducing a nonlinear investment function. His aim was to incorporate Minsky’s insights concerning the role of debt finance. The primary goal of this paper is to incorporate additional properties, inspired by van der Ploeg’s framework, into Keen’s model. Additionally, we outline possibilities for production technology that could be considered within this research program. Using numerical techniques, we show that our new model keeps the desirable properties of Keen’s model. However, we also demonstrate that when the economy is endowed with a class of CES production function that includes the Cobb–Douglas and the linear technology as limit cases, the unique stable equilibrium is an economically desirable one. Finally, we propose a modified extension that includes speculative component in the economy as in Grasselli and Costa-Lima (Math Financ Econ 6(3):191–210, 2012) and investigate its effect on the dynamics. We conclude that CES production function is a more suitable assumption for empirical purposes than the Leontief counterpart. Finally, we show, using numerical simulations, that under plausible calibration, the model endowed with CES production function eventually lose the cyclical property of Goodwin’s model with and without the speculative component.
Auteur(s)
Daniel Bastidas1
, Adrien Fabre2, 3
, Florent Mc Isaac4
1
UP1 -
Université Paris 1 Panthéon-Sorbonne
( 7550 )
- 12 place du Panthéon, 75231 Paris Cedex 05
- France
2
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
Université Paris 1 Panthéon-Sorbonne ( 7550 )
;
École normale supérieure - Paris ( 59704 )
;
Université Paris Sciences et Lettres ( 564132 )
;
École des hautes études en sciences sociales ( 99539 )
;
École des Ponts ParisTech ( 301545 )
;
Centre National de la Recherche Scientifique ( 441569 )
;
Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement ( 577435 )
3
PJSE -
Paris Jourdan Sciences Economiques
( 1171428 )
- 48 boulevard Jourdan 75014 Paris
- France
Université Paris 1 Panthéon-Sorbonne UMR8545 ( 7550 )
;
École normale supérieure - Paris ( 59704 )
;
Université Paris Sciences et Lettres ( 564132 )
;
Institut National de la Recherche Agronomique UMR1393 ( 92114 )
;
École des hautes études en sciences sociales ( 99539 )
;
École des Ponts ParisTech ( 301545 )
;
Centre National de la Recherche Scientifique ( 441569 )
4
AFD -
Agence française de développement
( 133737 )
- 5 Rue Roland Barthes - 75598 PARIS CEDEX 12
- France
Volume
13
Page/Identifiant
359–391
Langue du document
Anglais
Nom de la revue
Mathematics and Financial Economics
(ISSN : 1862-9679, ISSN électronique : 1862-9660)
Publié par Springer Verlag
Revue non référencée dans Sherpa-Romeo
Vulgarisation
Non
Comité de lecture
Oui
Audience
Internationale
Date de publication
2019
Domaine(s)
Sciences de l'Homme et Société/Economies et finances
C - Mathematical and Quantitative Methods/C.C0 - General/C.C0.C02 - Mathematical Methods
E - Macroeconomics and Monetary Economics/E.E1 - General Aggregative Models/E.E1.E10 - General
E - Macroeconomics and Monetary Economics/E.E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy/E.E2.E22 - Investment • Capital • Intangible Capital • Capacity
G - Financial Economics/G.G0 - General/G.G0.G01 - Financial Crises