chapter  8
DAD–DAS: estimated convergence and the emergence of “complex dynamics”
Pages 27

We use estimated parameter sets for studying the stability features of our model numerically as well as analytically. The strong convergence properties that we obtain in this way however only apply to the, by and large, linear version of our DAD-DAS system. They will completely disappear (in the downward direction) when this model type is enhanced by downward wage inflexibility, since the estimated DAD-DAS model is profit-led (where real wages increases are contractionary due to a dominance of investment over consumption). In a profit-led economy with downwardly rigid wages and (maybe only sluggishly) falling prices, it turns out that in a depressed situation real wages must increase, a fact which makes the ongoing depression ever deeper, until the economy either collapses or undergoes a significant change in behavior.