Pseudo-Goodwin cycles in a Minsky model

Stockhammer, Engelbert and Michell, Jo (2014) Pseudo-Goodwin cycles in a Minsky model. (Technical Report) Post Keynesian Economics Study Group. 17 p.

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Abstract

Goodwin cycles result from the dynamic interaction between a profit-led demand regime and a reserve army effect in income distribution. The paper proposes the concept of a pseudo-Goodwin cycle. We define this as a counter-clockwise movement in output and wage share space which is not generated by the usual Goodwin mechanism. In particular, it does not depend on a profit-led demand regime. To illustrate this, a simple Minsky-type model is extended by a reserve army distribution adjustment. In this model the cycle is generated by the interaction of financial fragility and demand. The wage share rises at higher levels of output but this generates no feedback so that, by design, demand does not react to changes in income distribution. But the model does exhibit a pseudo-Goodwin cycle in the output-wage share space. This holds true even if we introduce a wage-led demand regime. This demonstrates that the existence of a counter-clockwise movement of output and the wage share cannot be regarded as proof of the existence of a Goodwin cycle and a profit-led demand regime.

Item Type: Monograph (Technical Report)
Uncontrolled Keywords: business cycles; Goodwin cycle; Minsky cycle; financial fragility; distribution cycles; Post Keynesi
Research Area: Economics and econometrics
Faculty, School or Research Centre: Faculty of Arts and Social Sciences > School of Economics, History and Politics (from November 2012)
Depositing User: Engelbert Stockhammer
Date Deposited: 18 Jun 2014 11:40
Last Modified: 18 Jun 2014 11:40
URI: http://eprints.kingston.ac.uk/id/eprint/28543

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