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Notes on Keynesian models of recession and depression

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  • Luciano Fanti

Abstract

In this paper we have developed a "minimalist" Keynesian model (simplified version of Tobin's model, 1975) aiming at demonstrating the existence of endogenous cycles. We have shown that the Tobin's interpretation of the forces governing the stability can be misleading, in that 1) the speculative effect on demand is not necessary for instability, 2) this latter depends on the relative strength of the speeds of quantity adjustment and of price expectations to experience, given the "propensity to spend", in contrast with the condition claimed by Tobin, requiring that the "speculative" effects are prevailing on the "price" effects on aggregate demand. Moreover, we have shown that 1) on the one side a stable business cycle can emerge, despite of the almost linear assumptions; 2) on the other side the Tobin's belief that the economy might be stable for small deviations from its equilibrium but unstable for large shocks, has been confirmed in consequence of a local subcritical bifurcation in some parametric cases; 3) both price flexibility and price effects (i.e. Keynes and Pigou effects) does not play any role in restoring full employment equilibrium, in contrast with a common macroeconomic belief; 4) the business cycle not only is endogenous, but, as a matter of fact, it is the result of a traditional Walras-Keynes-Phillips macroeconomic model even with linear behavioural functions.

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Bibliographic Info

Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2003/19.

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Date of creation: 01 Jan 2003
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Handle: RePEc:pie:dsedps:2003/19

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Keywords: Keynesian macrodynamics; endogenous business cycle;

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Cited by:
  1. Luciano Fanti & Luca Gori, 2009. "Endogenous lifetime in an overlapping generations small open economy," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/92, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Luciano Fanti & Luca Gori, 2009. "Child policy ineffectiveness in an OLG small open economy with human capital accumulation and public education," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/93, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  3. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  4. Luca Gori, 2009. "Endogenous fertility, family policy and multiple equilibria," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/79, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  5. Manuela Gussoni - Andrea Mangani, 2009. "The impact of public funding for innovation on firms' R&D investments: Do R&D cooperation and appropriability matter?," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/90, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  6. Lorenzo Corsini & Elisabetta Olivieri, 2008. "Technological Change and the Wage Differential between Skilled and Unskilled Workers: Evidence from Italy," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2008/73, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  7. Luciano Fanti & Luca Gori, 2012. "PAYG Pensions and Economic Cycles Exogenous versus Endogenous Fertility," Public Finance Review, , , vol. 40(2), pages 240-269, March.

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