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Explaining persistent cycles in a short-run context: firms' propensity to invest and omnipotent shareholders


  • Sébastien Charles


In this paper, a standard short-run Kaleckian macromodel is developed. The stability of equilibrium is studied and some comparative static exercises are made. The paper then takes into account different specifications for an endogenous propensity to invest and systematically analyze the short-run dynamics of the model. It is shown that when firms' managers adopt abnormal behaviors due to pressures from shareholders regarding the propensity to invest, the system exhibits persistent cycles and chaotic trajectories. The analysis emphasizes that, even in the short run, shareholders may generate instability, which represents a serious threat that should not be underestimated for a capitalist economy.

Suggested Citation

  • Sébastien Charles, 2010. "Explaining persistent cycles in a short-run context: firms' propensity to invest and omnipotent shareholders," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(3), pages 409-426, April.
  • Handle: RePEc:mes:postke:v:32:y:2010:i:3:p:409-426

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    References listed on IDEAS

    1. Semmler, Willi, 1987. "A macroeconomic limit cycle with financial perturbations," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 469-495, September.
    2. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-393, December.
    3. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    4. Antonio Meirelles & Gilberto Lima, 2006. "Debt, financial fragility, and economic growth: a Post Keynesian macromodel," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(1), pages 93-115.
    5. Grasman, Johan & Wentzel, Jolanda J., 1994. "Co-existence of a limit cycle and an equilibrium in Kaldor's business cycle model and its consequences," Journal of Economic Behavior & Organization, Elsevier, vol. 24(3), pages 369-377, August.
    6. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2003. "Endogenous Banking Markup, Distributional Conflict and Capacity Utilization," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 366-384, May.
    7. Sébastien Charles, 2008. "Teaching Minsky's financial instability hypothesis: a manageable suggestion," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(1), pages 125-138, September.
    8. James R. Crotty, 1990. "Owner–Manager Conflict and Financial Theories of Investment Instability: A Critical Assessment of Keynes, Tobin, and Minsky," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 12(4), pages 519-542, July.
    9. Gatti, D. Delli & Gallegati, M. & Gardini, L., 1993. "Investment confidence, corporate debt and income fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 22(2), pages 161-187, October.
    10. Sébastien Charles, 2008. "Corporate debt, variable retention rate and the appearance of financial fragility," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 781-795, September.
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    Cited by:

    1. Hiroaki Sasaki & Shinya Fujita, 2012. "The Importance Of The Retention Ratio In A Kaleckian Model With Debt Accumulation," Metroeconomica, Wiley Blackwell, vol. 63(3), pages 417-428, July.
    2. Hiroaki Sasaki, 2016. "Increased Shareholder Power, Income Distribution, and Employment in a Neo-Kaleckian Model with Conflict Inflation," Discussion papers e-16-008, Graduate School of Economics , Kyoto University.

    More about this item


    fluctuations; Kaleckian model; propensity to invest;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other


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