The stabilizing role of the government in a dynamic distribution growth model

Samuele Bibi*

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

Abstract

This work builds upon “Keynes, Kalecki and Metzler in a Dynamic Distribution Model”. In that paper the dynamics of an economy from the ultra-short to the short period inside a Post-Keynesian perspective were studied questioning the general shared assumption of equilibrium between aggregate demand and aggregate supply in the short and long run Kaleckian models. This paper responds to some unresolved issues of the model proposed there considering a proper analysis of the Kaleckian investment function and a more realistic scenario with the presence of the government sector. Moreover, even if that model tried to deal with firms’ expectations in producing goods, some values boundaries were exogenously established. Here, those boundaries are questioned again. In fact, the novelty of this work is that an active role of the government can actually influence both the values of the expectations and their respective boundaries. It is argued that is particularly the case when the government is engaged in policies which aim is to support and secure a high level of economic activity and to smooth and steer the cycles phases toward a sustainable development path. Particularly we focus on the role of different fiscal policies aimed at obtaining such goals.

Original languageEnglish
Pages (from-to)112-142
Number of pages31
JournalJournal of Post Keynesian Economics
Volume44
Issue number1
Early online date2 Mar 2021
DOIs
Publication statusPublished - 2021
Externally publishedYes

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