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Explaining persistent cycles in a short-run context: firms' propensity to invest and omnipotent shareholders

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  • Sébastien Charles

Abstract

In this paper, a standard short-run Kaleckian macromodel is developed. The stability of equilibrium is studied and some comparative static exercises are made. The paper then takes into account different specifications for an endogenous propensity to invest and systematically analyze the short-run dynamics of the model. It is shown that when firms' managers adopt abnormal behaviors due to pressures from shareholders regarding the propensity to invest, the system exhibits persistent cycles and chaotic trajectories. The analysis emphasizes that, even in the short run, shareholders may generate instability, which represents a serious threat that should not be underestimated for a capitalist economy.

Suggested Citation

  • Sébastien Charles, 2010. "Explaining persistent cycles in a short-run context: firms' propensity to invest and omnipotent shareholders," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(3), pages 409-426, April.
  • Handle: RePEc:mes:postke:v:32:y:2010:i:3:p:409-426
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    11. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2003. "Endogenous Banking Markup, Distributional Conflict and Capacity Utilization," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 366-384, May.
    12. Sébastien Charles, 2008. "Corporate debt, variable retention rate and the appearance of financial fragility," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 781-795, September.
    13. Leonce Ndikumana, 1999. "Debt Service, Financing Constraints, and Fixed Investment: Evidence from Panel Data," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 21(3), pages 455-478, March.
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    Cited by:

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    2. Hiroaki Sasaki, 2016. "Increased Shareholder Power, Income Distribution, and Employment in a Neo-Kaleckian Model with Conflict Inflation," Discussion papers e-16-008, Graduate School of Economics , Kyoto University.

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    More about this item

    Keywords

    fluctuations; Kaleckian model; propensity to invest;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other

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