Finance, inflation and employment: A post-Keynesian/Kaleckian analysis

Argitis, Georgios; Dafermos, Yannis

Abstract

The purpose of this paper is to contribute to the post-Keynesian/Kaleckian macroeconomic literature. We develop a macroeconomic model that explicitly integrates the role of borrowing and cash payment commitments on outstanding debt (interest plus principal repayment) into the consumption and investment expenditures, as well as into the inflation-generating process. We explore the way that finance influences the distribution effects of inflation in the demand-side of a money/credit-using economy; we suggest a new Phillips curve that encapsulates the impact of financial commitments on wage and profit claims. We argue that high debt and cash payment commitments are likely to be associated with a positive demand-side effect of inflation on the rate of employment; and that they might be conducive to a negative supply-side effect of employment on the inflation rate. © The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

• Journal Article Type: Article
• Publication Date: Nov 1, 2011
• Journal: Cambridge Journal of Economics
• Print ISSN: 0309-166X
• Electronic ISSN: 1464-3545
• Publisher: Oxford University Press (OUP)
• Peer Reviewed: Peer Reviewed
• Volume: 35
• Issue: 6
• Pages: 1015-1033
• DOI: https://doi.org/10.1093/cje/ber002
• Keywords: Phillips curve, finance, debt payment commitments
• Public URL: https://uwe-repository.worktribe.com/output/957838
• Publisher URL: http://dx.doi.org/10.1093/cje/ber002