chapter  6
41 Pages

Disequilibrium growth in monetary economies: basic components and the KMG working model

ByPETER FLASCHEL

This chapter surveys, also for the general reader interested in non-market clearing models of growth and fluctuations, the foundations – and the core K(eynes)M(etzler)G(oodwin) model built on them – of the general framework underlying joint past and present work with Carl Chiarella and others on integrated disequilibrium models of monetary growth. The core KMG model of disequilibrium growth and its analysis is founded in this chapter on specifically reformulated and extended partial dynamic models of the literature, the PC-AC approach (of Goodwin and Rose) and the IS-LM-PC approach (of the textbook literature). We also briefly indicate at the end how the fundamental KMG model thus obtained (with its six basic laws of motion) can be extended into the direction of fairly detailed, high-dimensional macrotheoretic disequilibrium growth models of monetary economies, with strong relationships to a variety of models currently used for structural macroeconometric model-buildings and their applications.