PUB - Publikationen an der Universität Bielefeld

In this paper we present the modules of a continuous-time model of Keynesian monetary growth, of the variety introduced in Chiarella and Flaschel (2000) and treated in detail in Chiarella, Flaschel and Franke (2005). The model is sufficiently rich with respect to markets, sectors and agents and consistent with respect to budget constraints to capture the important details of actual macro-economies and so to serve as a macro-theoretic basis for larger scale macro models where a variety of Keynesian feedback structures are present. Simulations of this approach provide a persuasive foundation for a basic understanding of the interaction of these various feedback channels known from partial Keynesian reasoning, like the Harrod-Domar theory of the instability of balanced growth, the Goodwin-Rose distributive cycle mechanism, the Dornbusch overshooting exchange rate analysis and the Blanchard analysis of bond and asset markets dynamics. Of primary interest is on this basis the question how the various tax rates, transfer payments and government expenditure parameters of the model can be used to improve the social protection of the sector of worker households, without loosing the efficiency of a well-performing labor market (with its partial Friedmanian supply side aspects), and without neglecting the creation of a sound and sustainable infra-structure” for education, health care and care for the elderly.

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Contracted project with the International Labour Organization, Project No. 40091442 and working paper of the ILO in Geneva as far as the formal part of the paper is concerned. Thanks go to the ILO for financing this research project and for allowing me to republish it in the Bielefeld Open Access Library.