1. This chapter builds on and elaborates work done jointly with Gang Gong and Willi Semmler, see Chiarella, Flaschel, Gong and Semmler (2003), by proving in detail theorem 6.2 that was only sketched in their paper and by adding to it some further numerical investigations. Furthermore, in an appendix, we now also provide the complete presentation of the model on its extensive form level. In the discussion of the dynamics of the model we however follow this paper of Chiarella et al. in its intuitive presentation of the main building blocks and the central implications of this type of Keynesian macrodynamics.
2. See also Obstfeld and Rogoff (2000) and here chapter 7 for a model of a large open economy in a fixed exchange rate area that is still closely related to the closed economy case we consider in the present chapter.
3. The detailed consideration of interest rate policy rules is definitely a significant step forward, particularly pushed ahead within the context of the New IS-LM model of New Keynesian theory. Up to the present chapter and the next one we will however not go into the contemporaneous discussion of such monetary policy rules, see however King (2000) and Spahn (2001b) and their references for example, but will postpone this discussion to a later publication here (Chiarella, Flaschel, Franke and Skott, 2003 ).
4. See Keynes (1936), Metzler (1941) and Goodwin (1967) for the approaches this model type is referring to in its denomination, which may here be briefly characterized as the interaction of Keynes’ marginal propensities to consume, marginal efficiencies to invest, liquidity preferences, Metzlerian inventory-output adjustment mechanisms and finally a Goodwinian approach to the role played by income distribution. As indicated above the list of potential contributors to the framework here adopted may however be considered to be a much longer one.
5. The use of two in the place of only one Phillips curve - an unquestioned procedure during the rise of structural macroeconometric model building, see Chiarella, Flaschel, Groh and Semmler (2000) for a discussion of this on various levels of generality - is gathering force again, as indicated for example by the topics investigated in Cohen and Fahri (2001) and Mehra (2000). There are indeed numerous such questions to be obtained from a closer look at the wage-price spiral in the place of the single reduced form Phillips curve of mainstream Keynesian theory, whether old or new.