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On the adjustment of capacity utilisation to aggregate demand: Revisiting an old Sraffian critique to the Neo-Kaleckian model

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  • Gahn, Santiago José

Abstract

For many years, there was an unanswered theoretical question among Post-Keynesian scholars: What’s the behaviour through time of capacity utilisation after an aggregate demand shock? Under a (baseline and extended) Neo-Kaleckian framework, there should be a persistent effect on capacity utilisation to a shock like this one. On the other hand, Classical-Keynesian scholars are inclined to emphasise a continuous tendency towards normal utilisation. I tried to shed some light on this issue by adopting a Panel Structural VAR, time series SVAR and Local Projections. My findings, based on national quarterly data for 34 countries, suggest that the nature of the effects on effective capacity utilisation of shocks to the level of economic activity is merely transitory.

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  • Gahn, Santiago José, 2021. "On the adjustment of capacity utilisation to aggregate demand: Revisiting an old Sraffian critique to the Neo-Kaleckian model," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 325-360.
    • Handle: RePEc:eee:streco:v:58:y:2021:i:c:p:325-360
    DOI: 10.1016/j.strueco.2021.06.009
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    2. Santiago J. Gahn, 2022. "Towards an explanation of a declining trend in capacity utilisation in the US economy," Working Papers PKWP2214, Post Keynesian Economics Society (PKES).
    3. Stephen Thompson, 2022. "“The total movement of this disorder is its order”: Investment and utilization dynamics in long‐run disequilibrium," Metroeconomica, Wiley Blackwell, vol. 73(2), pages 638-682, May.
    4. Dvoskin, Ariel & Torchinsky Landau, Matías, 2023. "Income distribution and economic cycles in an open-economy supermultiplier model," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 273-291.
    5. Barbieri Góes, Maria Cristina & Deleidi, Matteo, 2022. "Output determination and autonomous demand multipliers: An empirical investigation for the US economy," Economic Modelling, Elsevier, vol. 116(C).
    6. Dögüs, Ilhan, 2021. "Production structure, output and profits - A note," ZÖSS-Discussion Papers 88, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).

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    More about this item

    Keywords

    Capacity utilisation; Growth; Income distribution; Neo-Kaleckian model; Sraffian supermultiplier; Structural VAR analysis; Local projections;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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