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Demand regimes, financialisation and hysteresis. New Keynesian and post-Keynesian macroeconomic underpinnings of the Varieties of Capitalism

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  • Engelbert Stockhammer

    (King’s College London)

Abstract

The recent integration of post-Keynesian insights into Comparative Political Economy is an exciting development. Post-Keynesian theory differs from neoclassical and Marxist theories in its analysis of the role of income distribution and of finance. It allows for wage-led demand regimes and it regards finance to be endogenously created and a source of instability. The paper contributes to the debate on the integration of demand regimes in the Varieties of Capitalism analyses. It contrasts post-Keynesian theory to the New Keynesian three equation model. It highlights that post-Keynesian theory gives prominence to the role of income distribution and allows for wage-led demand regimes; financial variables play a key role, which gives rise to endogenous instability and financial cycles (Minskyan debt cycles); economic growth is regarded as a path dependent process (with unemployment hysteresis due to wage norms) and is not anchored in a supply side equilibrium. However, PKE has so far mostly provided a normative analysis of government interventions. The ability to generate income and wealth rather than competitiveness is regarded as key criteria for a viable variety of capitalism.

Suggested Citation

  • Engelbert Stockhammer, 2018. "Demand regimes, financialisation and hysteresis. New Keynesian and post-Keynesian macroeconomic underpinnings of the Varieties of Capitalism," Working Papers PKWP1809, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp1809
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    References listed on IDEAS

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    Cited by:

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    2. Giancarlo Bertocco & Andrea Kalajzić, 2019. "A Keynes + Schumpeter model to explain development, speculation and crises," Working Papers PKWP1916, Post Keynesian Economics Society (PKES).

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    More about this item

    Keywords

    Varieties of Capitalism; post-Keynesian economics; financialisation;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General

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