Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/105978 
Year of Publication: 
2013
Series/Report no.: 
IMK Working Paper No. 110
Publisher: 
Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK), Düsseldorf
Abstract: 
In this paper we set up a baseline, but nevertheless advanced and complete model representing 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 generate, 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 through a ``cascade of stable matrices'' approach that the local stability of the full 7D model is given if the feedback chains are sufficiently tranquil in their transmission 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.
Subjects: 
Macroeconomic (In-)Stability
Segmented Labor Markets
Business Cycles
Fiscal and Monetary Policy Rules
JEL: 
E12
E24
E31
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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