ABSTRACT
In this chapter 1 we continue in a self-contained way the analysis of the dynamic properties of a general model of Keynesian monetary growth begun in Chiarella and Flaschel (1995a). This model exhibits a conventional IS–LM block based on goods market disequilibrium in place of the conventional multiplier equilibrium. Quantities in the goods market adjust through a Metzlerian inventory mechanism that refers to sales expectations and planned vs. actual inventory changes. Corresponding to this sluggish adjustment of quantities there are also sluggish price and wage adjustments, the former in the light of expected sales of firms and their thereby implied level of capacity utilization, and the latter in the basically conventional way of an expectations augmented wage Phillips curve, here with demand-pull and cost-push components. These real and nominal adjustment processes are supplemented by a money market equilibrium equation as theory of the nominal rate of interest.
