ABSTRACT
This chapter provides information on the classic Goodwin growth cycles model that took into account the extent to which its chief claims were verifiable. After working out the conceptual structure of the Goodwin model, it presents a brief contribution by Di Matteo introducing financial variables. Di Matteo sought to introduce money and prices into Goodwin's model, making the inflation rate behave pro-cyclically in response to the movement of the real unit labor costs Goodwin's model examines the joint dynamics of capital accumulation and endogenous cycles. Goodwin lays out his conceptual structure proving that in fact the actual trend for capital accumulation, will be set by the normal growth rate, defined as the sum of population and productivity growth rates. While Goodwin believes that the real relationship is non-linear, he uses a linear function as an approximation derived from Phillips empirical work. The phase diagram of Goodwin's model shows a self-reproducing orbit.
