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The distribution of savings behaviours and macro dynamics

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  • Orlando Gomes

Abstract

This article formulates a Keynesian macro model and explores its underlying dynamics. The distinctive features of the model relative to other Keynesian frameworks are: (1) the assumption that households are spread over a behavioural distribution that reflects their idiosyncratic attitudes towards savings; (2) the consideration of a macro–micro feedback mechanism according to which the state of the economy (measured by aggregate output or the unemployment rate) influences households’ savings behaviours. The devised analytical setup generates intuitive and appealing dynamic results, namely the formation of two alternative stable steady states, which are representative of two possible macroeconomic outcomes (with and without full employment). The stability of the steady state might be broken when the reaction of savings behaviours to perturbations in the unemployment rate is strong. The framework is flexible enough to allow for a compelling analysis of the implications of fiscal and monetary policies.

Suggested Citation

  • Orlando Gomes, 2025. "The distribution of savings behaviours and macro dynamics," Oxford Economic Papers, Oxford University Press, vol. 77(2), pages 375-399.
    • Handle: RePEc:oup:oxecpp:v:77:y:2025:i:2:p:375-399.
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    File URL: http://hdl.handle.net/10.1093/oep/gpae033
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    More about this item

    Keywords

    Keynesian macroeconomics; behavioural savings; decision heuristics; macroeconomic equilibrium; nonlinear dynamics; bifurcations and chaos;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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