A non-Walrasian model of the business cycle

This paper shows how the dynamic evolution of a short-run non-Walrasian equilibrium can generate cycles. The cyclic behavior of the system results from the combination of an unstable accelerator and of stabilizing price effects. The novelties of the model presented in this paper with respect to previous contributions in non-linear cycle theory are the use of a non-Walrasian equilibrium structure in the short run, and the fact that a cycle is obtained without having to assume any ad hoc shape for the various functions involved. Moreover the model bridges the gap between cycle theory and the traditional short-run IS-LM analysis.     

A derivation of the IS-LM model from explicit optimizing behavior

A general equilibrium analysis which closely resembles the ad hoc IS-LM model of traditional macroeconomics is derived from explicit optimizing behavior in an overlapping generations model in which individuals have finite lives and generations are not linked by the bequest motive. Therefore tax finance and bond finance are not equivalent, and the conventional analysis of open-market operations, and bond-financed changes in government spending and in current taxes require the changes in expected future taxes to be fully specified. These fully specified policy changes are analyzed under rational expectations.     

On the stability of non-Walrasian equilibria

We present a dynamic disequilibrium macro model which permits non-Walrasian or Keynesian equilibria as stationary states. Unlike the stability results obtained by Varian (1977), and Eckalbar (1979,1980,1981) in a series of papers in the same model, we show that such equilibria have the saddle point property when the real wage rate, the real money balances and expected output demand, all change in disequilibrium.     

Dynamics and stability in IS-LM models: A re-examination

This paper shows that when inventory adjustments are introduced in production decisions, there is no longer such thing as a “stable” or “unstable” system of ISLM curves, even when the inventory policy is completely specified. For one such system and one inventory policy, the trajectories of output and interest rate can either be stable or unstable. The fact that the IS-LM diagram can no longer be regarded as a phase diagram leads to problems in the definition of the aggregate demand curve.     

A comparative dynamic analysis of a growth model under alternate policy regimes

Comparative dynamic analysis is conducted on a growth model with variable price levels and wage rates. A perturbation technique is used to compare the economy's time paths near a balanced growth path in response to alternate policy regimes. Various dynamic policy multipliers are calculated in response to some of the alternate policy regimes such as the balanced-budget fiscal regime, the constant price regime, the full-employment regime, etc., to examine their dynamic implications on the economy's behavior. Temporary deviations in the fiscal variables are found to leave no permanent effects under all but one of the regimes examined.     

IS-LM stability and economic policy effectiveness: A note

Accepting the findings of Weber (1970) and Yarrow (1975), Cebula finds that conventional fiscal policy has its usual positive effect on the level of income while monetary policy has a negative impact. This paper shows that if a budget constraint of the specific, simplified form G ? T = ΔM is added to the model, the results differ from Cebula's.     

Committing and reneging: A dynamic model of policy regimes

Actual policy decisions are made in real time and are not irrevocable, but most policy modeling has largely neglected these mundane factors. In an environment of uncertainty, the ability to switch policies adds an option value to the choice problem. This “option to wait” makes the incumbent regime relatively more attractive (compared to the traditional once-and-for-all analysis), as does increased uncertainty, which increases the value of the option. Furthermore, because the commitment decision takes place in real time, policy choice displays hysteresis.     

Wealth effects; IS-LM Stability,and the efficacy of economic policies: A comment

The purpose of this comment is twofold: first, to show that the balanced-budget multiplier value in the Hwang-Yu (1984) model [their equation (8)] would become unity in a respecification of their money demand function that included disposable income instead of income and second, to further show that their tax multiplier, that is, tax-financed government debt retirement, remains negative nevertheless.     

A new proposal of pension regimes typology: empirical analysis of the OECD countries

In the paper, we present a new typology of pension regimes based on two main dimensions: the extent of involvement of the state and the market, and the role of voluntary schemes. We propose three theoretical pension regimes. The study proves that our theoretical typology is also consistent with empirical pension systems in OECD countries. In order to group them into the similar pension models, we employ multivariate statistical analysis. As a result of our empirical research, the regimes distinguished in the theoretical framework have found their counterparts in the clusters of real pension systems operating in 30 countries.     

The Spanish livestock model: A coevolutionary analysis

Coevolution is a wide theoretical framework that enables the study of socio-ecological transformations in different contexts and, specifically, in agrarian systems. This article analyses coevolutionary changes in Spanish livestock over the last 50 years, from the so-called “traditional” livestock model, in which ecological, social and economic elements co-evolve in closely interconnected relationships, to the currently dominant industrial livestock model, governed by “ecologies at a distance”. Not only meat consumption grew significantly as a consequence of the change in the prevailing livestock production model, Spain also became one of the most important meat producers in the European Union. Simultaneously, dependence on imported cereals and soya increased dramatically. Nevertheless, in spite of the prevalence of industrial logics, extensive livestock farming, that follows hybrid logics incorporating features from both models, still exists in Spain and, particularly, in Andalusia (Southern Spain). This locally based model is characterised by higher environmental standards, as well as its contribution to the preservation of a singular agro-ecosystem (dehesa). However, its long-term transformation and, therefore, the social construction of more sustainable local livestock systems, must be understood as a co-evolutionary process in which agency and social selection of innovations are essential elements.     

The Dynamic Interactions Between the Phillips Relation and the IS-LM Model*

In this paper the IS-LM model is extended dynamically by the addition of a price-adjustment relation (the Phillips relation) and a quantity-adjustment relation. Three specifications of the Phillips relation are considered. It is shown that the nature of the price-adjustment process has important implications for stability; in fact the price-adjustment processes which yield clockwise (counter-clockwise) Phillips loops may also be unstable (are not unstable). On the other hand, the speed of the price-adjustment process is not relevant for stability. The speed of quantity adjustment is only important in the expectations case and there the slower the speed of adjustment the more likely is instability. No clear conclusions emerge, in general, concerning the slopes of the IS-LM relations and stability. In conclusion the results are related to the debate on the micro-foundations of Keynesian economics.     

Textbook Treatments of the Financial Market in the IS-LM Model

Intermediate macroeconomics textbooks introduce financial markets into the IS-LM analysis but typically as a beginning-of-period consideration. Here the financial market is introduced in an end-of-period model.     

Yield Curve Inversion and the Incidence of Recession: A Dynamic IS-LM Model with Term Structure of Interest Rates

This paper attempts to explain why yield curve inversion may serve as a leading indicator of recessions. It employs an IS-LM model with the term structure of interest rates and provides a formal phase-diagram analysis of dynamic adjustment process. It demonstrates that the occurrence of yield curve inversion is an off-equilibrium phenomenon after an adverse shock in the adjustment process of interest rates and output, and that an inverted yield curve may lead, but does not lead to, a recession.     

A simple model of three economies with two currencies: the eurozone and the USA

This paper presents a Keynesian model which describes threecountries trading merchandise and financial assets with oneanother. It is initially assumed that all three countries haveindependent fiscal policies but that two of the countries sharea currency, hence the model can be used to make a preliminaryanalysis of the conduct of economic policy in ‘the eurozone’vis-à-vis the rest of the world—‘the USA’.The main conclusion will be that, if all three countries doindeed operate independent fiscal policies, the system willwork under a floating currency regime, but only so long as theEuropean central bank is prepared to modify the structure ofits assets by accumulating an ever rising proportion of billsissued by any ‘weak’ euro country.     

Wealth effects,IS-LM stability and the efficacy of economic policies

This paper considers the efficacy of macroeconomic policies in an extended Cebula-Wang IS-LM framework integrating wealth effects. We argue that an increase in money stock need not lead to a contraction of national income and bond-financed fiscal policy magnifies the positive impact on national income. In addition, money-financed fincal policy may have any effect on the level of income.     

Exchange rate regimes and the real sector: a sectoral analysis of CEE Countries

This article analyses the impact of exchange rate regimes on the real sector. While most studies in this field have so far concentrated on aggregate variables, we pursue a sectoral approach distinguishing between the tradable and non-tradable sectors. First, we present a survey of the relevant theoretical and empirical literature. This demonstrates that evaluations of exchange rate regimes and their impact on the real economy are largely dependent on specific assumptions concerning, in particular, the parameters of a utility function, the nature of the price adjustment process and the characteristics of the shocks analysed. Second, we conduct an empirical analysis of the behaviour of the tradable and non-tradable sectors under different exchange rate regimes in seven Central and Eastern European countries. We find no firm evidence of a differential impact of given exchange rate regimes on the dynamics of output and prices in the two sectors. We proffer a conceptual and technical interpretation of this.     

A pre-topological analysis of the input-output model

The letter proposes a new method for analyzing the industrial structures. This method is founded on the pre-topological properties of the set of activities.     

Inequality,emulation and debt: The occurrence of different growth regimes in the age of financialization in a stock-flow consistent model

In the era of financialization, increasing income inequality could be observed in most developed and many developing countries. Despite similar developments in inequality, the growth performance and drivers for growth differed markedly among countries, allowing clusters of different growth regimes to be identified. Among them are 2 extreme types: the debt-led private-demand boom and the export-led mercantilist economies. Whereas the former rely mainly on credit-financed household consumption in order to compensate for the potential lack of demand (associated with the depressing effect of financialisation), the latter rely on net exports as the main driver of aggregate demand. Using a stock-flow consistent model it will be demonstrated how increasing inequality, depending on a countries institutional structure and regulatory framework, affects growth differently, explaining the occurrence of both regime types.