A Simplified, ‘Benchmark’, Stock‐flow Consistent Post‐keynesian Growth Model

Abstract

Despite being arguably one of the most active areas of research in heterodox macroeconomics, the study of the dynamic properties of stock-flow consistent (SFC) growth models of financially sophisticated economies is still in its first steps. This paper attempts to offer a contribution to this line of research by presenting a simplified SFC Post-Keynesian growth model with well-defined dynamic properties and using it to shed light on the merits and limitations of the current heterodox SFC literature.It will be the objective of the historical model developed below to provide a simple analysis of capital accumulation by blending the stock and flow elements in the demand and supply of (i) real capital, (ii) money, and (iii) securities (. . .) with the more familiar concepts (. . .) of effective demand developed in the General Theory. Within such a framework it is possible to provide more perspective on the interplay among organized security exchanges, corporate financing policy, investment underwriters and the banking system in channeling the financial funds necessary for capital accumulation. Regrettably this is an analysis which is virtually ignored in most 'analytical' Post-Keynesian models.

Growth, Instability and Cycles: Harrodian and Kaleckian Models of Accumulation and Income Distribution

“…The empirical evidence in favour of signi…cant price rigidity is quite weak, however, 8 and output does not adjust instantaneously. Production is subject to a production lag, and increases in production and employment typically give rise to substantial search, hiring and training costs; …ring or layo¤s also involve costs, both explicit costs like redundancy payments and hidden costs in the form of deteriorating industrial relations and morale.…”

The Paradox of Monetary Profits: An Obstacle to Understanding Financial and Economic Crisis?

“…Godley and Lavoie (2007) and Dos Santos and Zezza (2008). In opposition to what was described as the economic approach to the definition of income, in their eager not to loose money into any black holes, this approach appear, as we shall demonstrate, to stick with certainty rather than relevance.…”

“…The exact method for this below the line measure of net worth is illustrated in Tables 5-7. The accounts again follow the tradition of stock-flow consistent modeling and the notation of Dos Santos and Zezza (2008), except for the treatment of equities. As has been emphasized by the financialisation literature (e.g.…”

Financialization in Kaleckian Economies with and without Labor Constraints

“…The markup on marginal cost need not be constant but it is typically seen as structurally determined; Dutt (1984, section 5), for instance, allows the markup to depend on industry concentration. 4 3. there is a low sensitivity of accumulation to variations in utilization, both in the short and the long run, and with a structurally determined markup, the utilization rate becomes an accommodating variable. Shocks to demand (changes in saving rates, for instance) can have large permanent e¤ects on utilization, and the steadygrowth value of the utilization rate is not, as in Harrodian or Robinsonian models, tied to a structurally determined desired rate.…”

“…3 In ‡uential formalizations of the Kaleckian model include Rowthorn (1981), Dutt (1984), Taylor (1985) and Marglin and Bhaduri (1990). Lavoie and Godley (2001-02), Stockhammer (2005-6), Hein and van Treeck (2007), Dos Santos and Zezza (2007), Lavoie (2007) and van Treeck (2007) are among the recent contributions that have analysed …nancialization using a Kaleckian framework. 4 Not all contributions to the Kaleckian literature adhere strictly to this assumption.…”