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When is the Long Run? – Historical Time and Adjustment Periods in Demand-led Growth Models

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  • Ettore Gallo

    (Department of Economics, New School for Social Research)

Abstract

In recent years, Post-Keynesian models of growth and distribution have substantially shifted their focus from short to long-run analysis. While many authors have focused on the convergence of demand-led growth models to a fully-adjusted equilibrium, relatively little attention has been given to the time required to reach this long-run position. In order to fill the gap, this paper seeks to answer the question of when is the long run in demand-led growth models. By making use of numerical integration, it analyses the time of adjustment from one steady-state to the other in two well-known demand-led growth models: the Sraffian Supermultiplier and the fully-adjusted version of the neo-Kaleckian model. The results show that the adjustment period is generally beyond an economically meaningful time span, suggesting that researchers and policy makers ought to pay more attention to the models’ predictions during the traverse rather than focusing on steady-state positions.

Suggested Citation

  • Ettore Gallo, 2022. "When is the Long Run? – Historical Time and Adjustment Periods in Demand-led Growth Models," Working Papers 2203, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:2203
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    Citations

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    Cited by:

    1. Graham White, 2023. "Autonomous demand, expectations and calibration: simulating demand led growth," Working Papers 2023-08, University of Sydney, School of Economics.
    2. Mark Setterfield, 2024. "The Kalecki-Robinson Tradition in Post-Keynesian Growth Theory," Working Papers 2402, New School for Social Research, Department of Economics.
    3. Ettore Gallo, 2024. "Reduction of CO2 Emissions, Climate Damage and the Persistence of Business Cycles: A Model of (De)coupling," Working Papers 2413, New School for Social Research, Department of Economics.
    4. Ana Bottega & Rafael S. M. Ribeiro, 2023. "Kalecki meets Schumpeter: The decline of competition in a demand‐led dynamic model," Metroeconomica, Wiley Blackwell, vol. 74(3), pages 584-605, July.
    5. Ettore Gallo & Maria Cristina Barbieri Goes, 2023. "Teaching heterodox macroeconomics: Some reflections from Macroeconomics after Kalecki and Keynes by Eckhard Hein," PSL Quarterly Review, Economia civile, vol. 76(305), pages 203-207.
    6. Ettore Gallo & Mark Setterfield, 2022. "Historical Time and the Current State of Post-Keynesian Growth Theory," Working Papers 2204, New School for Social Research, Department of Economics.

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    More about this item

    Keywords

    Neo-Kaleckian model; Sraffian Supermultiplier; time; adjustment period; traverse; effective demand; growth;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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