ABSTRACT
This chapter is related to current work on modern macroeconomic modelling in a, broadly speaking, Keynesian (but not new-Keynesian) tradition. It particularly draws on the disequilibrium approach advanced in Chiarella et al. (2005), which refers to Keynes, Metzler, Goodwin and Taylor as its patron saints. ‘Goodwin’ indicates that income distribution plays a crucial role in the dynamics. In the form of the wage share, it is determined by the interplay of a wage as well as a price Phillips curve, and in turn impacts positively on aggregate demand via workers’ consumption and negatively via profit-oriented investment. The Metzlerian part is a consequence of goods market disequilibrium, which is absorbed by inventories, while the evolution of the latter feeds back on planned inventory investment and thus aggregate supply. ‘Taylor’ takes account of monetary policy and follows the general consensus reached over the last decade that the central bank adopts an interest rate rule, most often specified as a variant of the Taylor rule responding to inflation and the output gap.
