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A post-keynesian macro-dynamic model of simulation

Author

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  • José Luis Oreiro
  • Fábio Hideki Ono

Abstract

The objective of this article is to present the structure and the simulation results of a one-sector macro-dynamic model that embeds some elements of the post-keynesian theory. The computational simulation of the model replicates some important features of capitalist dynamics as the phenomenon of cyclical growth, the long-run stability of the profit rate and functional distribution of income, the maintenance of idle-capacity in the long-run and the occurrence of a single episode of deep fall in real economic activity, which is in accordance with the rarity character of great crashes in the history of capitalism. Moreover, the simulation results show that a great reduction in inflation rate will be followed by an increase of financial fragility, increasing the like-hood of a great depression. As a policy advice derived from the simulation results, we can state that the Central Bank should never promote big reductions in inflation rate. JEL Classification: E5, E12.

Suggested Citation

  • José Luis Oreiro & Fábio Hideki Ono, 2007. "A post-keynesian macro-dynamic model of simulation," Brazilian Journal of Political Economy, Center of Political Economy, vol. 27(1), pages 82-107.
    • Handle: RePEc:ekm:repojs:v:27:y:2007:i:1:p:82-107:id:555
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    More about this item

    Keywords

    post-keynesian economics; computational economics; monetary Policy;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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