Description

This book provides an analysis of the endogenous mechanisms that govern the dynamic processes in capitalist economies. A nonlinear IS-LM version of a macromodel is developed in which real and financial feed-back mechanisms lead to income distribution-employment dynamics along with fluctuations in aggregate demand and the capacity utilisation rate. Emphasis is placed on the relevance of demand constraints in firms' pricing strategies, within the context of imperfectly competitive markets, and its implications for the dynamics of income distribution in the cyclical process. The financial mechanisms appear in terms of the effects of the endogenous liquidity creation process on the dynamics of firms' indebtedness. The stress is on the two-fold nature of «finance» it supports the accumulation process and enhances growth, and yet it can lead to financial fragility and act as a source of systemic instability.