Abstract:
We formulate a descriptive dynamic macroeconomic model of the Keynes-Wicksell type which incorporates goods, labour and financial markets. The model has well specified budget constraints with respect to the economic agents (households, firms and government) within it. We introduce some standard nonlinearities into the goods and labour markets. The dynamics of the general model consist of five differential equations; we analyse two- and three-dimensional subcases to show the existence of real and monetary cycles whose interaction will determine the full dynamics. We use numerical simulation to study the dynamics of the full model and the impact of various government fiscal and monetary policies.
