IDEAS home Printed from https://ideas.repec.org/a/bla/metroe/v66y2015i1p123-157.html
   My bibliography  Save this article

Endogenous Cycles and Chaos in a Capitalist Economy: A Circuit of Capital Model

Author

Listed:
  • Xiao Jiang

Abstract

This paper introduces a firm-level simulation model of the circuit of capital with financially extended Harrodian investment behavior. The model demonstrates that capitalist economies with heterogeneous firms can endogenously generate chaotic cycles. Stability and bifurcation analyses show that the (Harrodian) instability of the system is caused by the firm's ‘aggressiveness’ regarding the size of the ‘rent’ between investiments in the financial and the goods markets. Furthermore, the heterogeneity of firms results in a chaotic pattern of capital accumulation. Finally, a set of steady states around which the system fluctuates chaotically is found by solving the balanced growth problem.

Suggested Citation

  • Xiao Jiang, 2015. "Endogenous Cycles and Chaos in a Capitalist Economy: A Circuit of Capital Model," Metroeconomica, Wiley Blackwell, vol. 66(1), pages 123-157, February.
    • Handle: RePEc:bla:metroe:v:66:y:2015:i:1:p:123-157
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/meca.12065
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Peter Skott, 2012. "Theoretical And Empirical Shortcomings Of The Kaleckian Investment Function," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 109-138, February.
    2. Eckhard Hein, 2007. "Interest Rate, Debt, Distribution And Capital Accumulation In A Post‐Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 58(2), pages 310-339, May.
    3. Tarassow, Artur, 2010. "The empirical relevance of Goodwin’s business cycle model for the US economy," MPRA Paper 21012, University Library of Munich, Germany.
    4. Foley, Duncan K., 1982. "Realization and accumulation in a Marxian model of the circuit of capital," Journal of Economic Theory, Elsevier, vol. 28(2), pages 300-319, December.
    5. Michalis Nikiforos, 2013. "The (Normal) Rate of Capacity Utilization at the Firm Level," Metroeconomica, Wiley Blackwell, vol. 64(3), pages 513-538, July.
    6. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    7. Harris, Donald J, 1972. "On Marx's Scheme of Reproduction and Accumulation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 505-522, May-June.
    8. Armon Rezai, 2012. "Goodwin Cycles, Distributional Conflict And Productivity Growth," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 29-39, February.
    9. Nelson H. Barbosa‐Filho & Lance Taylor, 2006. "Distributive And Demand Cycles In The Us Economy—A Structuralist Goodwin Model," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 389-411, July.
    10. Heinz Kurz & Neri Salvadori, 2000. "'Classical' Roots of Input-Output Analysis: A Short Account of its Long Prehistory," Economic Systems Research, Taylor & Francis Journals, vol. 12(2), pages 153-179.
    11. Paulo L. Santos, 2014. "A Note on Credit Allocation, Income Distribution and the Circuit of Capital," Metroeconomica, Wiley Blackwell, vol. 65(2), pages 212-236, May.
    12. Foley, Duncan K., 1987. "Liquidity-profit rate cycles in a capitalist economy," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 363-376, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jonathan F. Cogliano & Roberto Veneziani & Naoki Yoshihara, 2022. "Computational methods and classical‐Marxian economics," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 310-349, April.
    2. Stephen Thompson, 2018. "Employment and fiscal policy in a Marxian model," Metroeconomica, Wiley Blackwell, vol. 69(4), pages 820-846, November.
    3. Jonathan F. Cogliano and Roberto Veneziani, 2024. "Classical Competition and Equilibrium: An Agent-Based Analysis," Working Papers 2024-01, University of Massachusetts Boston, Economics Department.
    4. Frank Beckenbach, 2020. "A value-theoretic approach to economic dynamics and evolution—synthesizing different Marxian modules in a simulation model," Review of Evolutionary Political Economy, Springer, vol. 1(2), pages 221-243, August.
    5. Stephen Thompson, 2022. "“The total movement of this disorder is its order”: Investment and utilization dynamics in long‐run disequilibrium," Metroeconomica, Wiley Blackwell, vol. 73(2), pages 638-682, May.
    6. Jonathan F. Cogliano & Roberto Veneziani, 2023. "Classical Competition and Equilibrium: An Agent-Based Analysis," Working Papers 977, Queen Mary University of London, School of Economics and Finance.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Distributive cycles and endogenous technical change in a BoPC growth model," Economic Modelling, Elsevier, vol. 77(C), pages 216-233.
    2. Michaelis Nikiforos, 2018. "Distribution-led growth through methodological lenses," FMM Working Paper 24-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Christian Schoder, 2012. "Effective demand, exogenous normal utilization and endogenous capacity in the long run. Evidence from a CVAR analysis for the US," IMK Working Paper 103-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Christian Schoder, 2012. "Instability, stationary utilization and effective demand: A synthesis of Harrodian and Kaleckian growth theory," IMK Working Paper 104-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    5. Amitava Krishna Dutt, 2017. "Heterodox Theories Of Economic Growth And Income Distribution: A Partial Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1240-1271, December.
    6. Christian Schoder, 2014. "Effective Demand, Exogenous Normal Utilization and Endogenous Capacity in the Long Run: Evidence from a Cointegrated Vector Autoregression Analysis for the USA," Metroeconomica, Wiley Blackwell, vol. 65(2), pages 298-320, May.
    7. Schoder, Christian, 2014. "Instability, stationary utilization and effective demand: A structuralist model of endogenous cycles," Structural Change and Economic Dynamics, Elsevier, vol. 30(C), pages 10-29.
    8. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    9. Fernando Rugitsky, 2015. "Financialization, Housing Bubble, and the Great Recession: an interpretation based on a circuit of capital model," Working Papers, Department of Economics 2015_24, University of São Paulo (FEA-USP).
    10. Joana David Avritzer, 2020. "Estimation of a long run regime for growth and demand through different filtering methods," Working Papers 2004, New School for Social Research, Department of Economics, revised Oct 2020.
    11. Daniele Tavani & Luca Zamparelli, 2017. "Government spending composition, aggregate demand, growth, and distribution," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(2), pages 239-258, April.
    12. Mark Setterfield & Joana David Avritzer, 2020. "Hysteresis in the normal rate of capacity utilization: A behavioral explanation," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 898-919, November.
    13. Eric Kemp‐Benedict, 2020. "Convergence of actual, warranted, and natural growth rates in a Kaleckian–Harrodian‐classical model," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 851-881, November.
    14. Kerim Eser Afc{s}ar & Mehmet Ozyi~git & Yusuf Yuksel & Umit Ak{i}nc{i}, 2021. "Testing the Goodwin Growth Cycles with Econophysics Approach in 2002-2019 Period in Turkey," Papers 2106.02546, arXiv.org.
    15. Araujo, Ricardo Azevedo & Dávila-Fernández, Marwil J. & Moreira, Helmar Nunes, 2019. "Some new insights on the empirics of Goodwin's growth-cycle model," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 42-54.
    16. Lorenzo Di Domenico, 2021. "Multiplicity and not necessarily heterogeneity: implications for the long-run degree of capacity utilization," Working Papers PKWP2116, Post Keynesian Economics Society (PKES).
    17. Ettore Gallo & Maria Cristina Barbieri Góes, 2023. "Investment, autonomous demand and long-run capacity utilization: an empirical test for the Euro Area," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 225-255, April.
    18. Ryoo, Soon, 2010. "Long waves and short cycles in a model of endogenous financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 163-186, June.
    19. Peter Skott, 2015. "Growth cycles with or without price flexibility," Review of Keynesian Economics, Edward Elgar Publishing, vol. 3(3), pages 374-386, July.
    20. Bassi, Federico & Bauermann, Tom & Lang, Dany & Setterfield, Mark, 2022. "Is capacity utilization variable in the long run? An agent-based sectoral approach to modeling hysteresis in the normal rate of capacity utilization," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 196-212.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:metroe:v:66:y:2015:i:1:p:123-157. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0026-1386 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.