IDEAS home Printed from https://ideas.repec.org/a/taf/revpoe/v18y2006i2p173-191.html
   My bibliography  Save this article

Effective demand in a stylised Keynesian model of growth

Author

Listed:
  • Keiran Sharpe

Abstract

This paper models an economy which suffers from a coordination failure and lack of effective demand in the long run. Specifically, it shows that an input-output economy, with or without credit rationing, converges to a long-period growth path, but that this path is generally Pareto sub-optimal. Yet, although Keynesian problems extend to the long run, typical Keynesian solutions do not: the government seems generally incapable of sustaining growth by demand management measures. The question as to what the government can do to sustain growth is an open one.

Suggested Citation

  • Keiran Sharpe, 2006. "Effective demand in a stylised Keynesian model of growth," Review of Political Economy, Taylor & Francis Journals, vol. 18(2), pages 173-191.
    • Handle: RePEc:taf:revpoe:v:18:y:2006:i:2:p:173-191
    DOI: 10.1080/09538250600571353
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09538250600571353
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09538250600571353?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176.
    2. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
    3. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(3), pages 441-463.
    4. Benassy, Jean-Pascal, 1993. "Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 732-761, June.
    5. Taylor, Mark P, 1999. "Real Interest Rates and Macroeconomic Activity," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 15(2), pages 95-113, Summer.
    6. Dixon, Huw David & Rankin, Neil, 1994. "Imperfect Competition and Macroeconomics: A Survey," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 171-199, April.
    7. Solow,Robert M., 1998. "Monopolistic Competition and Macroeconomic Theory," Cambridge Books, Cambridge University Press, number 9780521626163.
    8. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-1171, September.
    9. Kurz,Heinz D. & Salvadori,Neri, 1995. "Theory of Production," Cambridge Books, Cambridge University Press, number 9780521443258.
    10. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967.
    11. Kurz,Heinz D. & Salvadori,Neri, 1997. "Theory of Production," Cambridge Books, Cambridge University Press, number 9780521588676.
    12. Dumenil, Gerard & Levy, Dominique, 1987. "The Dynamics of Competition: A Restoration of the Classical Analysis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 11(2), pages 133-164, June.
    13. Solow,Robert M., 1998. "Monopolistic Competition and Macroeconomic Theory," Cambridge Books, Cambridge University Press, number 9780521623384.
    14. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    15. C. Monica Capra & Charles A. Holt, 1999. "Coordination," Southern Economic Journal, John Wiley & Sons, vol. 65(3), pages 630-636, January.
    16. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages 251-278, October.
    Full references (including those not matched with items on IDEAS)

    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. Michele Santoni, 2001. "Discriminatory procurement policy with cash limits can lower imports: an example," Departmental Working Papers 2001-03, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Michele Santoni, 2002. "Discriminatory Procurement Policy with Cash Limits," Open Economies Review, Springer, vol. 13(1), pages 27-45, January.
    3. Bill Dupor, 2005. "Keynesian Conundrum: Multiplicity and Time Consistent Stabilization," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 154-177, January.
    4. Riechmann, Thomas & Weimann, Joachim, 2008. "Competition as a coordination device: Experimental evidence from a minimum effort coordination game," European Journal of Political Economy, Elsevier, vol. 24(2), pages 437-454, June.
    5. Piero Ferri, 2011. "Macroeconomics of Growth Cycles and Financial Instability," Books, Edward Elgar Publishing, number 14260.
    6. repec:hal:spmain:info:hdl:2441/10287 is not listed on IDEAS
    7. Rabah Amir & Filomena Garcia & Malgorzata Knauff, 2006. "Endogenous Heterogeneity in Strategic Models: Symmetry-breaking via Strategic Substitutes and Nonconcavities," Working Papers Department of Economics 2006/29, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    8. Rabah Amir, 2005. "Supermodularity and Complementarity in Economics: An Elementary Survey," Southern Economic Journal, John Wiley & Sons, vol. 71(3), pages 636-660, January.
    9. Emmanuel Farhi & Jean Tirole, 2012. "Collective Moral Hazard, Maturity Mismatch, and Systemic Bailouts," American Economic Review, American Economic Association, vol. 102(1), pages 60-93, February.
    10. Angeletos, George-Marios & Calvet, Laurent-Emmanuel, 2006. "Idiosyncratic production risk, growth and the business cycle," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1095-1115, September.
    11. Lindenberger, Dietmar & Kuemmel, Rainer, 2011. "Energy and the State of Nations," EWI Working Papers 2011-11, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    12. John C. Driscoll & Steinar Holden, 2002. "Coordination, Fair Treatment and Inflation Persistence," NBER Working Papers 9174, National Bureau of Economic Research, Inc.
    13. Aleksandar Vasilev, 2013. "On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework," Working Papers 2013_20, Business School - Economics, University of Glasgow.
    14. Field, Jonathan & Large, Jeremy, 2008. "Pro-rata matching and one-tick futures markets," CFS Working Paper Series 2008/40, Center for Financial Studies (CFS).
    15. repec:spo:wpecon:info:hdl:2441/10287 is not listed on IDEAS
    16. Citanna, Alessandro & Cres, Herve & Dreze, Jacques & Herings, P. Jean-Jacques & Villanacci, Antonio, 2001. "Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices," Journal of Mathematical Economics, Elsevier, vol. 36(3), pages 169-200, December.
    17. Cynthia L. Doniger & J. David López-Salido, 2017. "Hysteresis via Endogenous Rigidity in Wages and Participation," Finance and Economics Discussion Series 2017-044, Board of Governors of the Federal Reserve System (U.S.).
    18. Kevin X. D. Huang, 2004. "Specific factors meet intermediate inputs : implications for strategic complementarities and persistence," Research Working Paper RWP 04-06, Federal Reserve Bank of Kansas City.
    19. L. Bagnoli & G. Negroni, 2008. "The emergence of norms of cooperation in stag hunt games with production," Working Papers 626, Dipartimento Scienze Economiche, Universita' di Bologna.
    20. José De Gregorio, 2009. "Global Confidence Crisis: The Value of Waiting and the Coordination Failures Revisited," Economic Policy Papers Central Bank of Chile 31, Central Bank of Chile.
    21. repec:spo:wpmain:info:hdl:2441/f6h8764enu2lskk9p4sqhi4gm is not listed on IDEAS
    22. Neri Salvadori & Rodolfo Signorino, 2013. "The Classical Notion of Competition Revisited," History of Political Economy, Duke University Press, vol. 45(1), pages 149-175, Spring.
    23. Chollete, Loran & Ning, Cathy, 2009. "The Dependence Structure of Macroeconomic Variables in the US," UiS Working Papers in Economics and Finance 2009/31, University of Stavanger.

    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:taf:revpoe:v:18:y:2006:i:2:p:173-191. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CRPE20 .

    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.