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On the (in-)stability and the endogeneity of the "normal" rate of capacity utilisation in a post-Keynesian/Kaleckian "monetary" distribution and growth model

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  • Eckhard Hein

    (IMK at the Hans Boeckler Foundation)

Abstract

In Kaleckian models of distribution and growth the equilibrium rate of capacity utilisation may persistently diverge from the ‘normal rate’ of utilisation. We assess this problem following the approach by Dumenil/Levy (1999) who consider the ‘normal rate’ of utilisation in a monetary production economy as the rate which is associated with price stability. Since inflation in our model is driven by distribution conflict, the ‘normal rate’ of utilisation is associated with consistent claims of firms and employees. Taking into account real debt effects of changes in inflation and distribution effects of monetary policy interventions we discuss the short-run stability of the ‘normal rate’ and address the issue of long-run endogeneity. Generally, we show that in a Kaleckian monetary distribution and growth model, which takes the major features of a credit economy seriously, the ‘normal rate’ of capacity utilisation is endogenous to distribution conflict and monetary policy intervention in the long run. And we also show that major Kaleckian results, in particular the paradox of costs, can be retained for the short and the long run.

Suggested Citation

  • Eckhard Hein, 2006. "On the (in-)stability and the endogeneity of the "normal" rate of capacity utilisation in a post-Keynesian/Kaleckian "monetary" distribution and growth model," IMK Working Paper 02-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:02-2006
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    Cited by:

    1. Mariolis, Theodore, 2007. "Distribution and Growth in an Economy with Heterogeneous Capital and Excess Capacity," MPRA Paper 24042, University Library of Munich, Germany.
    2. Eckhard Hein, 2016. "Secular stagnation or stagnation policy? Steindl after Summers," PSL Quarterly Review, Economia civile, vol. 69(276), pages 3-47.
    3. Hein, Eckhard, 2016. "The Bhaduri/Marglin post-Kaleckian model in the history of distribution and growth theories: An assessment by means of model closures," IPE Working Papers 66/2016, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. 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.
    5. Eckhard Hein, 2019. "Harrodian instability in Kaleckian models and Steindlian solutions," FMM Working Paper 46-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    Keywords

    distribution; growth; capacity utilisation; inflation; monetary policy;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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