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Are large national debt and ultra-low inflation harmful? —— S-shape Phillips curve: the inflation-unemployment relationship of a low profit rate model

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  • Yang, Jinrui

Abstract

This paper, through a neo-Kaleckian model of a closed industrialized economy, shows a large scale of national debt and an ultra-low inflation rate are not dangerous but necessary if the profit rate of capitalists is low. The S-shape Phillips curve in the static analyses (in the long-run perspective then) shows, when inflation rate is low (which is called semi-classical situation), unemployment rate increases with inflation rate. In the semi-classical situation, the ratio of national debt to GDP decreases with inflation rate while deficit ratio increases with inflation rate. The dynamic analyses show, if the government can fix inflation rate on a target level, an industrialized economy can be dynamically stable.

Suggested Citation

  • Yang, Jinrui, 2020. "Are large national debt and ultra-low inflation harmful? —— S-shape Phillips curve: the inflation-unemployment relationship of a low profit rate model," MPRA Paper 104970, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104970
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    employment; inflation; deficit; national debt; profit rate;
    All these keywords.

    JEL classification:

    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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