Fiscal Policy, Chartal Money, Mark‐up Dynamics and Unemployment Insurance in a Model of Growth and Distribution

Abstract

AbstractGiven one parameter restriction, an output‐stabilization rule for the provision of public services turns a Kaldor–Kalecki–Steindl growth model with unstable, catastrophe‐prone dynamics into one with a stable limit cycle. In contrast, using a budget‐balancing rule produces a saddle point, along with closed orbits near the boundaries of the state space. Adding Kaleckian mark‐up dynamics destabilizes the equilibrium, with a spiraling path followed by a spin‐out found in simulation. A final exercise establishes the possibility of adding a variable workforce and a public unemployment insurance system. Throughout, an identity governs the dynamics of the stocks of public financial liabilities.