IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v30y2014icp68-85.html
   My bibliography  Save this article

Keynesian systems with rigidity and flexibility of prices and inflation–deflation expectations

Author

Listed:
  • Murakami, Hiroki

Abstract

In this paper, by utilizing the Poincaré–Bendixson theory and the Hopf bifurcation theory, we analyze both rigid-price and flexible-price nonlinear disequilibrium Keynesian macroeconomic systems, prove the existence of a persistent business cycle and derive the conditions for global asymptotic stability of the equilibrium. Consequently, we find that a Hopf bifurcation occurs for a lower value of the quantity adjustment parameter in the flexible-price system than in the rigid-price one and that inflation expectation effects may easily destabilize the economic system. Furthermore, we reveal that global asymptotic stability of the flexible-price system is unlikely to be achieved.

Suggested Citation

  • Murakami, Hiroki, 2014. "Keynesian systems with rigidity and flexibility of prices and inflation–deflation expectations," Structural Change and Economic Dynamics, Elsevier, vol. 30(C), pages 68-85.
    • Handle: RePEc:eee:streco:v:30:y:2014:i:c:p:68-85
    DOI: 10.1016/j.strueco.2014.02.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X14000174
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2014.02.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Tobin, James, 1975. "Keynesian Models of Recession and Depression," American Economic Review, American Economic Association, vol. 65(2), pages 195-202, May.
    2. Fischer, Stanley, 1972. "Keynes-Wicksell and Neoclassical Models of Money and Growth," American Economic Review, American Economic Association, vol. 62(5), pages 880-890, December.
    3. Semmler, Willi, 1986. "On nonlinear theories of economic cycles and the persistence of business cycles," Mathematical Social Sciences, Elsevier, vol. 12(1), pages 47-76, August.
    4. Brock, William A. & Scheinkman, JoseA., 1976. "Global asymptotic stability of optimal control systems with applications to the theory of economic growth," Journal of Economic Theory, Elsevier, vol. 12(1), pages 164-190, February.
    5. Semmler, Willi, 1987. "A macroeconomic limit cycle with financial perturbations," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 469-495, September.
    6. Varian, Hal R, 1979. "Catastrophe Theory and the Business Cycle," Economic Inquiry, Western Economic Association International, vol. 17(1), pages 14-28, January.
    7. Sasakura, Kazuyuki, 1994. "On the dynamic behavior of Schinasi's business cycle model," Journal of Macroeconomics, Elsevier, vol. 16(3), pages 423-444.
    8. Asada, Toichiro, 2006. "Stabilization policy in a Keynes-Goodwin model with debt accumulation," Structural Change and Economic Dynamics, Elsevier, vol. 17(4), pages 466-485, December.
    9. Stein, Jerome L, 1969. ""Neoclassical" and "Keynes-Wicksell" Monetary Growth Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(2), pages 153-171, May.
    10. Yoshikawa, Hiroshi, 1981. "Alternative Monetary Policies and Stability in a Stochastic Keynesian Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 541-565, October.
    11. Jess Benhabib & Kazuo Nishimura, 2012. "The Hopf Bifurcation and Existence and Stability of Closed Orbits in Multisector Models of Optimal Economic Growth," Springer Books, in: John Stachurski & Alain Venditti & Makoto Yano (ed.), Nonlinear Dynamics in Equilibrium Models, edition 127, chapter 0, pages 51-73, Springer.
    12. Ito, Takatoshi, 1978. "A note on the positivity constraint in Olech's theorem," Journal of Economic Theory, Elsevier, vol. 17(2), pages 312-318, April.
    13. James Tobin, 1993. "Price Flexibility and Output Stability: An Old Keynesian View," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 45-65, Winter.
    14. W. W. Chang & D. J. Smyth, 1971. "The Existence and Persistence of Cycles in a Non-linear Model: Kaldor's 1940 Model Re-examined," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(1), pages 37-44.
    15. Thomas I. Palley, 2008. "Keynesian Models of Deflation and Depression Revisited: Inside Debt and Price Flexibility," Working Papers wp169, Political Economy Research Institute, University of Massachusetts at Amherst.
    16. Flaschel, Peter & Sethi, Rajiv, 1996. "Classical dynamics in a general model of the Keynes-Wicksell type," Structural Change and Economic Dynamics, Elsevier, vol. 7(4), pages 401-428, December.
    17. H. Rose, 1967. "On the Non-Linear Theory of the Employment Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(2), pages 153-173.
    18. Torre, V, 1977. "Existence of Limit Cycles and Control in Complete Keynesian System by Theory of Bifurcations," Econometrica, Econometric Society, vol. 45(6), pages 1457-1466, September.
    19. Schinasi, Garry J., 1982. "Fluctuations in a dynamic, intermediate-run IS-LM model: Applications of the Poincare-Bendixon theorem," Journal of Economic Theory, Elsevier, vol. 28(2), pages 369-375, December.
    20. Benassy, Jean-Pascal, 1984. "A non-Walrasian model of the business cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 5(1), pages 77-89, March.
    21. Palley, Thomas I., 2008. "Keynesian models of deflation and depression revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 167-177, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hiroki Murakami, 2019. "A note on the “unique” business cycle in the Keynesian theory," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 384-404, July.
    2. Murakami, Hiroki, 2020. "Monetary policy in the unique growth cycle of post Keynesian systems," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 39-49.
    3. Murakami, Hiroki, 2018. "Existence and uniqueness of growth cycles in post Keynesian systems," Economic Modelling, Elsevier, vol. 75(C), pages 293-304.
    4. Murakami, Hiroki, 2015. "Wage flexibility and economic stability in a non-Walrasian model of economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 32(C), pages 25-41.
    5. Murakami, Hiroki & Sasaki, Hiroaki, 2020. "Economic development with public capital accumulation: The crucial role of wage flexibility on business cycles," Economic Modelling, Elsevier, vol. 93(C), pages 299-309.
    6. Hiroki Murakami, 2016. "Alternative monetary policies and economic stability in a medium-term Keynesian model," Evolutionary and Institutional Economics Review, Springer, vol. 13(2), pages 323-362, December.
    7. Lixiao Hao & Vasilios I. Manousiouthakis, 2021. "Sustainability over sets and the business cycle," SN Business & Economics, Springer, vol. 1(6), pages 1-26, June.
    8. Murakami, Hiroki, 2022. "The unique limit cycle in post Keynesian theory," Chaos, Solitons & Fractals, Elsevier, vol. 154(C).
    9. Hiroki Murakami, 2022. "Keynesian and classical theories: static and dynamic perspectives," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 343-367, April.
    10. Murakami, Hiroki & Asada, Toichiro, 2018. "Inflation-deflation expectations and economic stability in a Kaleckian system," Journal of Economic Dynamics and Control, Elsevier, vol. 92(C), pages 183-201.
    11. Murakami, Hiroki & Zimka, Rudolf, 2020. "On dynamics in a two-sector Keynesian model of business cycles," Chaos, Solitons & Fractals, Elsevier, vol. 130(C).
    12. Murakami Hiroki, 2017. "Time elements and oscillatory fluctuations in the Keynesian macroeconomic system," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(2), pages 1-22, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hiroki Murakami, 2016. "Alternative monetary policies and economic stability in a medium-term Keynesian model," Evolutionary and Institutional Economics Review, Springer, vol. 13(2), pages 323-362, December.
    2. Hiroki Murakami, 2019. "A note on the “unique” business cycle in the Keynesian theory," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 384-404, July.
    3. Murakami, Hiroki, 2015. "Wage flexibility and economic stability in a non-Walrasian model of economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 32(C), pages 25-41.
    4. Murakami, Hiroki, 2020. "Monetary policy in the unique growth cycle of post Keynesian systems," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 39-49.
    5. Murakami, Hiroki & Asada, Toichiro, 2018. "Inflation-deflation expectations and economic stability in a Kaleckian system," Journal of Economic Dynamics and Control, Elsevier, vol. 92(C), pages 183-201.
    6. Murakami, Hiroki & Zimka, Rudolf, 2020. "On dynamics in a two-sector Keynesian model of business cycles," Chaos, Solitons & Fractals, Elsevier, vol. 130(C).
    7. Murakami, Hiroki, 2018. "Existence and uniqueness of growth cycles in post Keynesian systems," Economic Modelling, Elsevier, vol. 75(C), pages 293-304.
    8. Carl Chiarella & Peter Flaschel, 1999. "Towards Applied Disequilibrium Growth Theory: III Basic Partial Feedback Structures and Stability Issues," Working Paper Series 95, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    9. K. Vela Velupillai, 2008. "JAPANESE CONTRIBUTIONS TO NONLINEAR CYCLE THEORY IN THE 1950s," The Japanese Economic Review, Japanese Economic Association, vol. 59(1), pages 54-74, March.
    10. Flaschel, Peter & Sethi, Rajiv, 1996. "Classical dynamics in a general model of the Keynes-Wicksell type," Structural Change and Economic Dynamics, Elsevier, vol. 7(4), pages 401-428, December.
    11. Toichiro Asada, 1995. "Kaldorian dynamics in an open economy," Journal of Economics, Springer, vol. 62(3), pages 239-269, October.
    12. Carl Chiarella & Peter Flaschel, 1999. "Disequilibrium Growth Theory: Foundations, Synthesis, Perspectives," Working Paper Series 85, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    13. Murakami Hiroki, 2017. "Time elements and oscillatory fluctuations in the Keynesian macroeconomic system," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(2), pages 1-22, April.
    14. Ogawa, Shogo, 2022. "Monetary growth with disequilibrium: A non-Walrasian baseline model," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 512-528.
    15. Toichiro Asada, 1991. "On a mixed competitive-monopolistic macrodynamic model in a monetary economy," Journal of Economics, Springer, vol. 54(1), pages 33-53, February.
    16. Michael Assous, 2013. "Irving Fisher's debt deflation analysis: From the Purchasing Power of Money (1911) to the Debt-deflation Theory of the Great Depression (1933)," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 20(2), pages 305-322, April.
    17. Hiroki Murakami, 2022. "Keynesian and classical theories: static and dynamic perspectives," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 343-367, April.
    18. Ichiro Takahashi, 2021. "An Artificial Wicksell—Keynes Macroeconomy," Springer Books, Springer, number 978-981-16-6839-5, September.
    19. Steven M. Fazzari & Pietro E. Ferri & Edward G. Greenberg & Anna Maria Variato, 2013. "Aggregate demand, instability, and growth," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 1-21, January.
    20. Willi Semmler & Fabio Della Rossa & Giuseppe Orlando & Gabriel R. Padro Rosario & Levent Kockesen, 2023. "Endogenous Economic Resilience, Loss of Resilience, Persistent Cycles, Multiple Attractors, and Disruptive Contractions," Working Papers 2309, New School for Social Research, Department of Economics.

    More about this item

    Keywords

    Keynesian economics; Bifurcations; Business cycles; Nonlinear analysis;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:30:y:2014:i:c:p:68-85. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/525148 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.