Chapter 7 Keynes-Metzler-Goodwin (KMG) Model Building: A Baseline Approach to Keynesian Disequilibrium Growth
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In chapter 7 we analyze theoretically and study numerically a Keynes-Metzler-Goodwin growth model with active inventory policy in manufacturing. Households, firms and the government interact across real and financial markets. The model allows for asymptotic stability in case of sluggish wage / price adjustment, moderate inventory adjustment processes on the market for goods and sufficient elasticity regarding equilibria in the asset markets. It is studied - with its intrinsic nonlinearities only - by means of our cascade of stable matrices approach. We then add extrinsic nonlinearities based on the institutional features of modern economies, such as downward money wage rigidity. The dynamic properties are then studied in detail by bifurcation diagrams, stability basins, and by distributive characteristics of key economic quantities.

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