Stability of zero-growth economics analysed with a Minskyan model

Barrett, Adam (2018) Stability of zero-growth economics analysed with a Minskyan model. Ecological Economics, 146. pp. 228-239. ISSN 0921-8009

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Abstract

As humanity is becoming increasingly confronted by Earth’s finite biophysical limits, there is increasing interest in questions about the stability and equitability of a zero-growth capitalist economy, most notably: if one maintains a positive interest rate for loans, can a zero-growth economy be stable? This question has been explored on a few different macroeconomic models, and both ‘yes’ and ‘no’ answers have been obtained. However, economies can become unstable whether or not there is ongoing underlying growth in productivity with which to sustain growth in output. Here we attempt, for the first time, to assess via a model the relative stability of growth versus no-growth scenarios. The model employed draws from Keen’s model of the Minsky financial instability hypothesis. The analysis focuses on dynamics as opposed to equilibrium, and scenarios of growth and no-growth of output (GDP) are obtained by tweaking a productivity growth input parameter. We confirm that, with or without growth, there can be both stable and unstable scenarios. To maintain stability, firms must not change their debt levels or target debt levels too quickly. Further, according to the model, the wages share is higher for zero-growth scenarios, although there are more frequent substantial drops in employment.

Item Type: Article
Schools and Departments: School of Engineering and Informatics > Informatics
Research Centres and Groups: Sackler Centre for Consciousness Science
Subjects: H Social Sciences > HB Economic theory. Demography > HB0131 Methodology > HB0135 Mathematical economics. Quantitative methods Including econometrics, input-output analysis, game theory
Depositing User: Marianne Cole
Date Deposited: 16 Oct 2017 09:39
Last Modified: 09 Apr 2018 10:50
URI: http://sro.sussex.ac.uk/id/eprint/70534

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