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Explaining persistent cycles in a short-run context: firms’ propensity to invest and omnipotent shareholders

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  • Charles, Sébastien

Abstract

In this article, we develop a standard short-run Kaleckian macromodel. First, we study the stability of equilibrium and make some comparative static exercises. Then, we take into account different specifications for an endogenous propensity to invest and systematically analyze the short-run dynamics of the model. We show that when firms’ managers adopt abnormal behaviours due to pressures from shareholders regarding the propensity to invest the system exhibits persistent cycles and chaotic trajectories. The analysis emphasizes that, even in the short-run, shareholders may generate instability which represents a serious threat that should not be underestimated for a capitalist economy.

Suggested Citation

  • Charles, Sébastien, 2009. "Explaining persistent cycles in a short-run context: firms’ propensity to invest and omnipotent shareholders," MPRA Paper 18520, University Library of Munich, Germany, revised 2009.
    • Handle: RePEc:pra:mprapa:18520
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    References listed on IDEAS

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    1. Semmler, Willi, 1987. "A macroeconomic limit cycle with financial perturbations," Journal of Economic Behavior & Organization, Elsevier, vol. 8(3), pages 469-495, September.
    2. Mark Setterfield (ed.), 2002. "The Economics of Demand-Led Growth," Books, Edward Elgar Publishing, number 1864.
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    8. Gilberto Tadeu Lima & Antonio J. A. Meirelles, 2003. "Endogenous Banking Markup, Distributional Conflict and Capacity Utilization," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 366-384, May.
    9. Sébastien Charles, 2008. "Teaching Minsky's financial instability hypothesis: a manageable suggestion," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(1), pages 125-138, September.
    10. Marc Lavoie, 1992. "Foundations of Post-Keynesian Economic Analysis," Books, Edward Elgar Publishing, number 275.
    11. James R. Crotty, 1990. "Owner–Manager Conflict and Financial Theories of Investment Instability: A Critical Assessment of Keynes, Tobin, and Minsky," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 12(4), pages 519-542, July.
    12. Sébastien Charles, 2008. "Corporate debt, variable retention rate and the appearance of financial fragility," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(5), pages 781-795, September.
    13. Leonce Ndikumana, 1999. "Debt Service, Financing Constraints, and Fixed Investment: Evidence from Panel Data," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 21(3), pages 455-478, March.
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    Cited by:

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    2. Hiroaki Sasaki, 2016. "Increased Shareholder Power, Income Distribution, and Employment in a Neo-Kaleckian Model with Conflict Inflation," Discussion papers e-16-008, Graduate School of Economics , Kyoto University.

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    More about this item

    Keywords

    Kaleckian model; propensity to invest; fluctuations;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other

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