Foundations for a Disequilibrium Theory of the Business Cycle Qualitative Analysis and Quantitative Assessment

Building on The Dynamics of Keynesian Monetary Growth by Chiarella and Flaschel (2000), this book is a key contribution to business cycle theory, setting out a disequilibrium approach with gradual adjustments of the key macroeconomic variables. Its analytic study of a deterministic model of economic activity, inflation and income distribution integrates elements in the tradition of Keynes, Metzler and Goodwin (KMG). After a qualitative analysis of the basic feedback mechanisms, the authors calibrate the KMG model to the stylized facts of the business cycle in the U.S. economy, and then undertake a detailed numerical investigation of the local and global dynamics generated by the model. Finally, topical issues in monetary policy are studied in small macromodels as well as for the KMG model by incorporating an estimated Taylor-type interest rate reaction function. The stability features of this enhanced model are also compared to those of the original KMG model.

Figures; Tables; Notation; Foreword J. Barkley Rosser, Jr; Preface; 1. Competing approaches to Keynesian macrodynamics; Part I. Textbook Approaches: 2. AS-AD growth theory: a complete analysis of the textbook model; 3. Disequilibrium growth: the point of departure; Part II. Analytical Framework. Theory and Evidence: 4. The Keynes-Metzler-Goodwin model; 5. Calibration of three wage-price modules; 6. Calibration of the full KMG model; 7. Subsystems and sensitivity analysis of the KMG model; Part III. Monetary Policy: 8. The Taylor Rule in small macro models; 9. Incorporating the Taylor Rule into KMG; References.

An advanced model of economic activity, inflation and income distribution in a Keynesian spirit is developed in this 2005 book. The model is used to produce macroeconomic simulation studies and a detailed study of the macroeconomic impact of various monetary policy rules. It will appeal both to theorists and economic policy-makers.