Munich Personal RePEc Archive

A Supermultiplier Stock-Flow Consistent model: the return of the paradoxes of thrift and costs in the long run?

Brochier, Lidia and Macedo e Silva, Antonio Carlos (2017): A Supermultiplier Stock-Flow Consistent model: the return of the paradoxes of thrift and costs in the long run? Forthcoming in: Cambridge Journal of Economics No. Advanced Access (7 June 2018): pp. 1-30.

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Abstract

Supermultiplier models have been recently brought to the post-Keynesian debate. Yet these models still rely on quite simple economic assumptions, being mostly ow models which omit the �nancial determinants of autonomous expenditures. Since the output growth rate converges in the long run to the exogenously given growth rate of \non-capacity creating" autonomous expenditure and the utilization rate moves towards the normal utilization rate, the paradoxes of thrift and costs remain valid only as level e�ects (average growth rates). This paper investigates whether the core conclusions of supermultiplier models hold in a more complex economic framework, described by means of a supermultiplier SFC model, in which private business investment is assumed to be completely induced by income while the autonomous expenditure component - in this case consumption out of wealth - becomes endogenous. The results of the numerical simulation experiments suggest that the paradox of thrift can remain valid in terms of growth e�ects and that a lower pro�t share can also be associated to a higher accumulation rate, though with a lower pro�t rate.

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