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Credit-Driven Investment, Heterogeneous Labor Markets and Macroeconomic Dynamics

Author

Listed:
  • Matthieu Charpe

    (International Labor Organization)

  • Peter Flaschel

    (Bielefeld University)

  • Hans-Martin Krolzig

    (Kent University)

  • Christian Proaño

    (Department of Economics, New School for Social Research)

  • Willi Semmler

    (Department of Economics, New School for Social Research)

  • Daniele Tavani

    (Colorado State University)

Abstract

In this paper we set up a baseline, but nevertheless advanced and complete model rep-resenting detailed goods market dynamics, heterogeneous labor markets, dual and cross-dual wage-price adjustment processes, as well as counter-cyclical government policies. The cyclical movements of output generates, through Okun's law, employment variations in the heterogeneous labor market. The core of the resulting Keynesian macrodynamics is however given by credit-financed investment behavior and loan-rate setting by credit suppliers. The framework is constructed in such way that simplified, lower dimensional versions of the model can be obtained by setting parameters describing specific feedback effects from one sector to another equal to zero. Starting from such low dimensional sub-dynamics, we show the local stability of the full 7D model through a "cascade of stable matrices" approach if the feedback chains are sufficiently tranquil in their trans-mission mechanisms. However, local stability is the point of departure for the numerical investigation of local explosiveness and the forces that can bound such a behavior.

Suggested Citation

  • Matthieu Charpe & Peter Flaschel & Hans-Martin Krolzig & Christian Proaño & Willi Semmler & Daniele Tavani, 2013. "Credit-Driven Investment, Heterogeneous Labor Markets and Macroeconomic Dynamics," Working Papers 1301, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:1301
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    File URL: https://repec.economicpolicyresearch.org/econ/2013/NSSR_WP_012013.pdf
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    Cited by:

    1. is not listed on IDEAS
    2. Matthieu Charpe & Carl Chiarella & Peter Flaschel & Christian R. Proaño, 2014. "Business Confidence and Macroeconomic Dynamics in a Nonlinear Two-Country Framework with Aggregate Opinion Dynamics," Working Papers 1401, New School for Social Research, Department of Economics.
    3. Schleer, Frauke & Semmler, Willi, 2015. "Financial sector and output dynamics in the euro area: Non-linearities reconsidered," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 235-263.
    4. Yanovski, Boyan & Tahri, Ibrahim & Lessmann, Kai, 2024. "Green transition and macroeconomic stabilization," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 586-601.
    5. Schleer, Frauke & Semmler, Willi, 2013. "Financial sector-output dynamics in the euro area: Non-linearities reconsidered," ZEW Discussion Papers 13-068, ZEW - Leibniz Centre for European Economic Research.
    6. Ryunosuke Sonoda & Hiroaki Sasaki, 2019. "Differences in wage-determination systems between regular and non-regular employment in a Kaleckian model," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(3), pages 341-360, July.
    7. Shogo Ogawa, 2019. "Dynamic analysis of a disequilibrium macroeconomic model with dual labor markets," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 525-550, July.

    More about this item

    Keywords

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    JEL classification:

    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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