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Being Keynesian in the Short Term and Classical in the Long Term: The Traverse to Classical Long-Term Equilibrium

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  • Dumenil, Gerard
  • Levy, Dominique
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    Abstract

    We analyse the relationship between the Keynesian (post-Keynesian, Kaleckian) and classical perspectives, emphasizing the distinction between two time frames, short term and long term. A model is presented in which the traverse to a long-term classical equilibrium, with prices of production, is obtained as a sequence of short-term Keynesian equilibria (in which outputs are adjusted to demands). In the short term, prices and capital stocks are constant; they are only adjusted in the long term. Prices respond to disequilibria concerning capacity utilization rates. Investment is subject to a financing constraint, in which the provision of loans by the banking system is involved. Loans are modified in response to inflation (monetary policy). Copyright 1999 by Blackwell Publishers Ltd and The Victoria University of Manchester

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    Bibliographic Info

    Article provided by University of Manchester in its journal Manchester School.

    Volume (Year): 67 (1999)
    Issue (Month): 6 (December)
    Pages: 684-716

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    Handle: RePEc:bla:manchs:v:67:y:1999:i:6:p:684-716

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    Cited by:
    1. Marc Lavoie & Gabriel Rodriguez & Mario Seccareccia, 2004. "Similitudes and Discrepancies in Post-Keynesian and Marxist Theories of Investment: A Theoretical and Empirical Investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 127-149.
    2. Marc Lavoie & Wynne Godley, 2000. "Kaleckian Models of Growth in a Stock-Flow Monetary Framework: A Neo-Kaldorian Model," Macroeconomics 0004049, EconWPA.
    3. Christian Schoder, 2012. "Instability, stationary utilization and effective demand: A synthesis of Harrodian and Kaleckian growth theory," IMK Working Paper 104-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Eckhard Hein & Marc Lavoie & Till van Treeck, 2008. "Some instability puzzles in Kaleckian models of growth and distribution: A critical survey," IMK Working Paper 19-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    5. Henry, Jacques & Lavoie, Marc, 2002. "La traverse de Hicks dans son modèle horizontal bisectoriel : le réaménagement de la structure productive," L'Actualité Economique, Société Canadienne de Science Economique, vol. 78(1), pages 87-114, Mars.
    6. Datta, Soumya, 2013. "Convergence, cycles and complex dynamics of financing investment," MPRA Paper 52111, University Library of Munich, Germany, revised 10 Dec 2013.
    7. Charles, Sébastien & Lang, Dany & Asensio, Angel, 2010. "Post-Keynesian modelling: where are we, and where are we going to?," MPRA Paper 30726, University Library of Munich, Germany.
    8. Christian Schoder, 2012. "Endogenous capital productivity in the Kaleckian growth model. Theory and Evidence," IMK Working Paper 102-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Commendatore, Pasquale & Pinto, Antonio & Sushko, Iryna, 2014. "A post-Keynesian model of growth and distribution with a constraint on investment," Structural Change and Economic Dynamics, Elsevier, vol. 28(C), pages 12-24.
    10. Peter Skott, 2008. "Growth, instability and cycles: Harrodian and Kaleckian models of accumulation and income distribution," UMASS Amherst Economics Working Papers 2008-12, University of Massachusetts Amherst, Department of Economics.
    11. Thomas I. Palley, 2012. "A neo-Kaleckian - Goodwin model of capitalist economic growth: Monopoly power,managerial pay, labor market conflict, and endogenous technical progress," IMK Working Paper 105-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    12. Christian Schoder, 2012. "Effective demand, exogenous normal utilization and endogenous capacity in the long run. Evidence from a CVAR analysis for the US," IMK Working Paper 103-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. Hiroaki Sasaki, 2011. "Is the Long-run Equilibrium Wage-led or Profit-led? A Kaleckian Approach," Discussion papers e-11-002, Graduate School of Economics Project Center, Kyoto University.
    14. Sasaki, Hiroaki, 2012. "Is the long-run equilibrium wage-led or profit-led? A Kaleckian approach," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 231-244.
    15. Lee, Frederic & Jo, Tae-Hee, 2010. "Social surplus approach and heterodox economics," MPRA Paper 27636, University Library of Munich, Germany.
    16. Schoder, Christian, 2011. "Kaleckian vs. Marxian specifications of the investment function: Some empirical evidence for the US," MPRA Paper 29584, University Library of Munich, Germany.

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