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When is the long run?—Historical time and adjustment periods in demand‐led growth models

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  • Ettore Gallo

Abstract

In recent years, Post‐Keynesian analysis has been characterized by a renewed interest in long‐run theories of growth and distribution. While many authors have focused on the convergence of demand‐led growth models to a fully adjusted equilibrium, relatively little attention has been given to the time required to reach this long‐run position. In order to fill the gap, this paper seeks to answer the question of when is the long run in demand‐led growth models. By making use of numerical integration, it analyses the time of adjustment from one steady‐state to the other in two well‐known demand‐led growth models: the Sraffian Supermultiplier and the fully adjusted version of the neo‐Kaleckian model. The results show that the adjustment period is generally beyond an economically meaningful time span, suggesting that researchers and policy makers ought to pay more attention to the models' predictions during the traverse rather than focusing on steady‐state positions.

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  • Ettore Gallo, 2022. "When is the long run?—Historical time and adjustment periods in demand‐led growth models," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1155-1178, November.
    • Handle: RePEc:bla:metroe:v:73:y:2022:i:4:p:1155-1178
    DOI: 10.1111/meca.12400
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    Cited by:

    1. Ana Bottega & Rafael S. M. Ribeiro, 2023. "Kalecki meets Schumpeter: The decline of competition in a demand‐led dynamic model," Metroeconomica, Wiley Blackwell, vol. 74(3), pages 584-605, July.
    2. Ettore Gallo & Mark Setterfield, 2022. "Historical Time and the Current State of Post-Keynesian Growth Theory," Working Papers 2204, New School for Social Research, Department of Economics.
    3. Mark Setterfield, 2024. "The Kalecki-Robinson Tradition in Post-Keynesian Growth Theory," Working Papers 2402, New School for Social Research, Department of Economics.
    4. Ettore Gallo & Maria Cristina Barbieri Goes, 2023. "Teaching heterodox macroeconomics: Some reflections from Macroeconomics after Kalecki and Keynes by Eckhard Hein," PSL Quarterly Review, Economia civile, vol. 76(305), pages 203-207.
    5. Graham White, 2023. "Autonomous demand, expectations and calibration: simulating demand led growth," Working Papers 2023-08, University of Sydney, School of Economics.

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    More about this item

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • 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
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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