Kaldorian Model Research Articles

Stochastic sensitivity analysis of the variability of dynamics and transition to chaos in the business cycles model

A problem of mathematical modeling of complex stochastic processes in macroeconomics is discussed. For the description of dynamics of income and capital stock, the well-known Kaldor model of business cycles is used as a basic example. The aim of the paper is to give an overview of the variety of stochastic phenomena which occur in Kaldor model forced by additive and parametric random noise. We study a generation of small- and large-amplitude stochastic oscillations, and their mixed-mode intermittency. To analyze these phenomena, we suggest a constructive approach combining the study of the peculiarities of deterministic phase portrait, and stochastic sensitivity of attractors. We show how parametric noise can stabilize the unstable equilibrium and transform dynamics of Kaldor system from order to chaos.

Structural change and economic growth: Advances and limitations of Kaldorian growth models

Many different approaches have addressed the issue of why were some developing countries able to reduce the income gap with developed economies while others were not. However, few approaches take into account the process of structural change. This paper reviews the theoretical basis of the Kaldorian approach for the relationship between structural change and countries’ long-term economic growth, emphasising its recent developments and its limitations. According to Kaldor, structural change towards specific sectors continuously increases countries’ growth rates through a cumulative causation process. Although he had stressed it exhaustively, only recently Kaldorian models have explicitly incorporated this feature. Nevertheless, these models still face significant limitations to show how a cumulative causation process takes place in an open economy. The paper discusses the most relevant such limitations, and suggests options for future directions. JEL codes: 041, E12, F43

Household debt and housing bubbles: a Minskian approach to boom-bust cycles

This paper examines macroeconomic dynamics of household debt and housing prices in a two-class economy. Drawing on Minsky’s insights into financial instability and cycles, our framework combines household debt dynamics with behavioral asset price dynamics in a Keynesian macro model. We show that endogenous boom-bust cycles can emerge through the interaction between household debt and housing price dynamics. In this model, a long period of housing bubbles is characterized by increases in the profit share and the workers’ indebtedness for most of the time. The long waves are combined with a Kaldorian model of short-run business cycles.

A discrete mathematical model for chaotic dynamics in economics: Kaldor’s model on business cycle

This paper, following Kaldor’s approach, is written with the intention of interpreting fluctuations of economic systems (i.e trade cycles). In particular, a new discretized Kaldor model is proposed, which is also useful to explain what appears to be random and unpredictable, such as economic shocks. Moreover, by using numerical analysis, the chaoticity of the model is demonstrated.

Analysis of stochastic effects in Kaldor-type business cycle discrete model

We study nonlinear stochastic phenomena in the discrete Kaldor model of business cycles. A numerical parametric analysis of stochastically forced attractors (equilibria, closed invariant curves, discrete cycles) of this model is performed using the stochastic sensitivity functions technique. A spatial arrangement of random states in stochastic attractors is modeled by confidence domains. The phenomenon of noise-induced transitions “chaos-order” is discussed.

Homoclinic and Heteroclinic Motions in Economic Models with Exogenous Shocks

Abstract In this study, we theoretically prove the presence of homoclinic and heteroclinic motions in the dynamics of economic models perturbed with exogenous shocks. An illustrative example based on the Kaldor model of the aggregate economy is presented.

Manufacturing and economic development: The actuality of Kaldor's first and second laws

The objective of this paper is to evaluate the role of the manufacturing sector in the development process based on two laws of Kaldor. The first law states that the higher the growth of the manufacturing output, the more significant is the growth rate of the economy's product as a whole. The second law, known as the Kaldor–Verdoorn law, establishes a deterministic relation between the growth of manufacturing productivity and manufacturing output growth. This paper begins showing stylized facts of the production and exports of manufactured goods to show that these remain related to the income level of countries in recent years. Thereafter, a theoretical reflection on the importance of manufacturing in the process of economic development is performed, associating it to the manufacturing exports and to the exchange rate regime. Then, the paper performs a Kaldorian model systematization to assess the importance of manufacturing and its exports on the economic development. Econometric tests are performed based on a dynamic panel data for a sample of 63 middle and high-income countries, excluding major exporters of fuels for the period between 1990 and 2011, to analyze whether there is any difference in growth dynamics between these two groups. Estimates attest the occurrence of the two Kaldor laws, demonstrating that output growth in the manufacturing sector is essential to increasing economic growth and productivity, particularly in middle-income economies. The results also confirm that manufacturing exports are relevant to the development process and that the exchange rate contributes to this process in middle-income countries.

Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective

AbstractThe paper examines the determinants of income and wealth inequality in a Kaldorian model. The approach is different from both the mainstream approach that stresses properties of production function and the Kaleckian approach that emphasizes the long‐run adjustment of utilization. The analysis identifies several developments that may have increased inequality since the 1980s, including the shift of the power relation in favor of top managerial pay, the decline in the retention rate, increasing share buybacks, rising indebtedness of lower‐income households and stock market booms. In contrast to Piketty's explanation, the decline in the natural growth rate reduces inequality in this Kaldorian framework.

Demand-driven Goodwin cycles with Kaldorian and Kaleckian features

Goodwin's original endogenous growth cycle describes a supply-driven counter-clockwise movement in employment rate and labor share (Goodwin 1967). Such cycles are observed in (US) data. Similarly, counter-clockwise cycles exist between utilization rate and labor share, and utilization rate and employment rate. This paper presents a critical discussion of two demand-driven frameworks to explain these cycles, namely a Goodwin–Kaldor model and a Goodwin–Kalecki model. The two models share important features. The main difference lies in the approach to the determination of the distribution of income. We argue that the Goodwin–Kalecki model's 'profit squeeze' is the preferable approach.

Cyclical Patterns in Japanese Manufacturing Firms: Analyzing Three Post- Keynesian Models

This paper examines cyclical patterns of employment, capacity utilization, and profit share in Japanese manufacturing companies during 1978–2007. It evaluates significant behavioral equations to determine whether year-specific and trend data confirm three notable post-Keynesian macroeconomic models: the Kaldorian, the Robinsonian, and the Kaleckian. Some stylized facts about relationships among bivariate variables are presented. Results of the output growth equation on employment and profit share are statistically significant, and the signs are consistent with the Kaldorian model. Conversely, the Robinsonian and Kaleckian price adjustment models are not supported, while results of the investment function do not support the Kaleckian model.

Analysis of dynamic regimes in stochastically forced Kaldor model

We consider the business cycle Kaldor model forced by random noise. Detailed parametric analysis of deterministic system is carried out and zones of coexisting stable equilibrium and stable limit cycle are found. Noise-induced transitions between these attractors are studied using stochastic sensitivity function technique and confidence domains method. Critical values of noise intensity corresponding to noise-induced transitions “equilibrium → cycle” and “cycle → equilibrium” are estimated. Dominants in combined stochastic regimes are discussed.

Анализ стохастической динамики в дискретной макроэкономической модели Калдора

Анализ стохастической динамики в дискретной макроэкономической модели Калдора

Dynamic Analysis of Two Policy Lags in a Kaldorian Model

We examine the effects of policy lags on local economic stability using a Kaldorian model. This study analyzes two cases: the case of a monetary policy with a time lag and the case of a policy with both fiscal and monetary lags. Similar to the case of fiscal policy lags examined in a previous study, monetary policy lags have destabilizing effects on economic stability. However, in the case of the existence of both fiscal and monetary policy lags, there is a possibility that a monetary policy lag can stabilize an economy.

Chaotic Dynamics in Economics: Kaldor's Model on Business Cycle

This paper, written with the intention of formulating a macroeconomic model of trade cycles - following Kaldor’s approach - explains the fluctuations of economic systems by using some numerical instruments. The reason for choosing a chaotic model will become clear as will the implications which follow during the treatment. Finally, having seen that the model proposed is also useful in explaining what appears to be random and unpredictable such as economic shocks, there will be a numerical analysis to demonstrate its chaoticity.

Wage and Profit-Led Growth: The Limits to Neo-Kaleckian Models and a Kaldorian Proposal

We argue that a fundamental difference between Post-Keynesian approaches to economic growth lies in their treatment of investment. Kaleckian-Robinsonian models postulate an investment function dependent on the accelerator and profitability. Some of these models rely on the importance of profitability, captured by the profit share, to make the case for profit-led growth. For their part, Kaldorian models place the emphasis on the accelerator. More important, investment is a derived demand; that is, it is ruled by the adjustment of capacity to exogenous demand, which, in turn, determines the normal level of capacity utilization. In our view, the Kaldorian approach is better equipped to deal with some of the issues relating income distribution to accumulation with effective demand in the long run. We develop a Kaldorian open-economy model to examine the conditions under which an increase in real wages can produce profit or wage-led growth, showing that the limit to a wage-led expansion is a binding external constraint. The role and limitations of wages as a determinant of growth are further examined through spectral techniques and cycle analysis for a subset of developed economies. The evidence indicates that real wages are positively related to growth, investment, and capacity utilization. It also highlights the role of finance in sustaining expansions, suggesting that debt-led growth should not be identified with profit-led growth.

A Kaldor-Hicks-Goodwin-Tobin-Kalecki model of growth and distribution

This paper presents a Kaldorian model of growth that incorporates both Kaldor's theory of income distribution and his endogenous technical progress function. Growth is driven by demand-side forces that induce supply-side accommodation. The model incorporates Hicksian induced innovation; Goodwin Marxist style labor conflict that affects wage bill division between workers and managers; Tobin inflation effects; and Kalecki monopoly power effects. Unlike the neo-Kaleckian model, a Kaldorian economy operates at normal capacity utilization. Monopoly power plays a role as a barrier to entry rather than determining the functional distribution of income.

Complex Price Dynamics in the Modified Kaldorian Model

In this article we analyse a neoclassical model of inflation. Our aim is to reconstruct the neoclassical theory of inflation to obtain a model which generates non-periodical oscillations of price level. This model is considered to be a realistic approximation of actual price level evolution. We start our analysis with the Fisherian equation of exchange. The assumption on non-variability of the velocity of money circulation parameter is relaxed in favour of dependence on expected inflation. The resulting model of inflation is a two-equation model where price evolution depends on production dynamics which is assumed to be an exogenous variable. After that, the two-equation model is re-formulated as an autonomous system to a model where production dynamics is determined by a Kaldorian type's model. By adding Kaldor's model to the two equation system, we create a four equation model. Both our models are able to generate more complex dynamics, i.e. non-linear cycles and chaos, which we examine by generating time series from numerical example and analyse them with the help of an advanced non-linear method.

BIFURCATION ANALYSIS OF A DISCRETE-TIME KALDOR MODEL OF BUSINESS CYCLE

This paper reports bifurcation dynamics of a discrete-time Kaldor model of business cycle. By using center manifold theorem and bifurcation theory, it is shown that the model not only undergoes flip bifurcation and Neimark–Sacker bifurcation, but also 1 : 1 resonance of codimension two bifurcation occurs. Some numerical examples are given to support the analytic results.

An empirical evaluation of three post-Keynesian models

Structuralist and post-Keynesian models differ in their assumptions about firms' investment behavior and pricing/output decisions. This paper compares three benchmark models: Kaleckian, Robinsonian and Kaldorian. We analyze the implications of these models for the steady growth path and the cyclical properties of the economy, and evaluate the consistency of the theoretical predictions with empirical evidence for the US. Our regression results and the stylized cyclical pattern of key variables are consistent with the Kaldorian model. The Kaleckian investment function and the Robinsonian pricing behavior find no support in the data.

Codimension-2 bifurcations of the Kaldor model of business cycle

In this paper, complete analysis is presented to study codimension-2 bifurcations for the nonlinear Kaldor model of business cycle. Sufficient conditions are given for the model to demonstrate Bautin and Bogdanov–Takens (BT) bifurcations. By computing the first and second Lyapunov coefficients and performing nonlinear transformation, the normal forms are derived to obtain the bifurcation diagrams such as Hopf, homoclinic and double limit cycle bifurcations. Some examples are given to confirm the theoretical results.