A Supermultiplier Stock-Flow Consistent Model: The Return of the Paradoxes of Thrift and Costs in the Long Run?

Brochier, L. and Macedo e Silva, A.C. A Supermultiplier Stock-Flow Consistent Model: the Return of the Paradoxes of Thrift and Costs in the Long Run? Cambridge Journal of Economics, bey008, doi: 10.1093/cje/bey008

34 Pages Posted: 20 Dec 2018

See all articles by Lídia Brochier

Lídia Brochier

Universidade Federal do Rio de Janeiro (UFRJ) - Institute of Economics

Antônio Carlos Macedo e Silva

Universidade Estadual de Campinas (UNICAMP) - Instituto de Economia

Date Written: March 21, 2017

Abstract

Supermultiplier models have been recently brought to the post-Keynesian debate. Yet these models still rely on quite simple economic assumptions, being mostly flow models which omit the financial determinants of autonomous expenditures. Since the output growth rate converges in the long run to the exogenously given growth rate of "non-capacity creating" autonomous expenditure and the utilization rate moves towards the normal utilization rate, the paradoxes of thrift and costs remain valid only as level effects (average growth rates). This paper investigates whether the core conclusions of supermultiplier models hold in a more complex economic framework, described by means of a supermultiplier SFC model, in which private business investment is assumed to be completely induced by income while the autonomous expenditure component - in this case consumption out of wealth - becomes endogenous. The results of the numerical simulation experiments suggest that the paradox of thrift can remain valid in terms of growth effects and that a lower profit share can also be associated to a higher accumulation rate, though with a lower profit rate.

Keywords: supermultiplier; SFC model; autonomous expenditures; paradoxes of thrift and costs; growth theories

JEL Classification: B59, E11, E12, E25, O41

Suggested Citation

Brochier, Lídia and Macedo e Silva, Antônio Carlos, A Supermultiplier Stock-Flow Consistent Model: The Return of the Paradoxes of Thrift and Costs in the Long Run? (March 21, 2017). Brochier, L. and Macedo e Silva, A.C. A Supermultiplier Stock-Flow Consistent Model: the Return of the Paradoxes of Thrift and Costs in the Long Run? Cambridge Journal of Economics, bey008, doi: 10.1093/cje/bey008 , Available at SSRN: https://ssrn.com/abstract=3293258 or http://dx.doi.org/10.2139/ssrn.3293258

Lídia Brochier (Contact Author)

Universidade Federal do Rio de Janeiro (UFRJ) - Institute of Economics ( email )

Rio de Janeiro, 22290-240
Brazil
+5521990532399 (Phone)

Antônio Carlos Macedo e Silva

Universidade Estadual de Campinas (UNICAMP) - Instituto de Economia ( email )

Sao Paulo, Campinas
Brazil

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
13
Abstract Views
273
PlumX Metrics