Inflation and speculation in a dynamic macroeconomic model
Abstract
We study a monetary version of the Keen model by merging two alternative
extensions, namely the addition of a dynamic price level and the introduction
of speculation. We recall and study old and new equilibria, together with their
local stability analysis. This includes a state of recession associated with a
deflationary regime and characterized by falling employment but constant wage
shares, with or without an accompanying debt crisis. We also emphasize some new
qualitative behavior of the extended model, in particular its ability to
produce and describe repeated financial crises as a natural pace of the
economy, and its suitability to describe the relationship between economic
growth and financial activities.