This book is in the tradition of non-market-clearing approaches to macrodynamic economics. It shows for the first time that macrodynamics can be developed and investigated in a systematic fashion, leading to coherent models of fluctuation growth. This differs considerably from the microfounded full equilibrium approaches that are currently fashionable. Using sophisticated mathematical tools, it investigates complex macrodynamic feedback mechanisms in a systematic way, showing how macrodynamics can be developed in a hierarchical way from economically simple structures to more advanced ones.

model, which generally does not exist for fixed proportions technologies in the frequently assumed case s : s : s. This U A latter assumption furthermore is further from reality than the one we Tobinian monetary growth 73 employ. Of course, assuming Kaldorian differentiated saving habits would be even better (extended possibly also to other groups of savers such as pension funds for example). This extension is, however, completely avoided in the present book and must be left for future

T 9 G : 9 M /p]. E 5 Equilibrium and disequilibrium conditions (asset markets): (2.54) (2.55) (2.56) M " MB[K " KB], (2.57) M :M B[K : K B, see 6]. (2.58) 6 Say’s Law on the market for goods and labor-market disequilibrium: K B : S ; S : S : Y 9 K 9 C 9 G : K , N E (2.59) 94 The Dynamics of Keynesian Monetary Growth LB " L[V : LB/L " const.]. (2.60) 7 Wage–price inflation and inflationary expectations: wˆ : (V 9 V ) ; pˆ ; (1 9 ) , U U U pˆ : ((M 9 MB)/(pK)) ; wˆ ; (1 9 )

dynamical system by two to a two-dimensional one 166 The Dynamics of Keynesian Monetary Growth in the variables m and . The resulting dynamical system reads mˆ : : L 9n9 9 (i( · ) ; n 9 s( · )), N (i( · ) ; n 9 s( · )) ; ( 9 n 9 ), N L (3.63) (3.64) where i( · ) ; n 9 s( · ) : i( 9 r(m) ; ) ; n 9 s ( 9 tL) ; nm : g(m, ), A with g 9 0, g 9 0. K L The isoclines m : 0, : 0 of the above two-dimensional dynamical system are implicitly defined by 0: 9n9 9 g(m, ), (3.65) N

interaction We have considered in section 3.5 the local Rose-type instability that is caused by a negative dependence of goods-market disequilibrium on the real wage (i 9 s ) which, when coupled with a sufficient strength of speed of A adjustment of prices, gives rise to a positive dependence of the time rate of change of real wages on their level. Let us call this situation, in which pˆ( ) 9 0, a positive Rose effect for simplicity. In addition, we have investigated in section 3.6 the local

order to make possible the assumed goods market equilibrium. In contrast to the fashionable full equilibrium version of the Tobin models we thereby arrive at the basic Keynesian prototype structure that will underlie all following generalizations of models of monetary growth exhibiting IS—LM-equilibrium and disequilibrium on the labor market and within firms. These disequilibria General introduction 7 are then used as the basis for wage and price adjustments and the investment decision of