Conflicting claims and equilibrium adjustment processes in a stock-flow consistent macro model
AbstractWe revisit the old but still vibrant Post-Keynesian debate over "fully-adjusted positions", defined by the long-run equality of actual and standard utilisation rates. The central proposition of this paper is that in a world where different groups inside and outside firms have different objectives, the equality of actual and standard utilisation should not be treated as the (only possible) long-run equilibrium condition. The argument is illustrated in a model of target return pricing with conflict inflation, building on Lavoie (2002, 2003). A "common language" for the conflicting claims by shareholders, managers, workers and banks is developed in terms of target profit rates, and it is shown that these contradictory claims can be partly reconciled through variations in the utilisation rate. The analysis unifies history and equilibrium in the sense that the nature of and the adjustment to the final equilibrium position depends on the objectives of the dominant social groups. We distinguish a "Fordist regime" and a "financialisation regime" and produce simulation results within a simple stock-flow consistent model that are broadly consistent with the stylised facts of these distinct historical phases of capitalism.
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Bibliographic InfoPaper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 09-2008.
Length: 31 pages
Date of creation: 2008
Date of revision:
Macroeconomic policies; New Consensus Model; Post-Keynesian Model; inflation targeting;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
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