DYNAMICS OF NATURAL RATES OF GROWTH AND EMPLOYMENT

Abstract

We investigate the dynamics of an integrated Keynesian disequilibrium model of monetary growth that allows for a variety of labor-market and employment-adjustment processes. The structure of the model is naturally nonlinear, i.e., no extrinsic nonlinear economic behavioral relationships are imposed at first. The dynamics of the model are nine-dimensional and are investigated analytically by considering appropriate subdynamics. The model generates limit cycles (via Hopf bifurcations) and more complex dynamic behavior (when a natural kink in the money-wage Phillips curve is taken into account). It exhibits hysteresis effects with respect to long-run unemployment as well as growth and implies the occurrence of steady-state depressions in particular.