Marcelo de Oliveira Passos - José Luís Oreiro
A Post-Keynesian Macrodynamic Simulation Model for an Open Economy

Abstract:The objective of this article is to present the structure and first simulation results of a post-keynesian macro-dynamic model for an open economy with floating exchange rates and imperfect mobility of capital. The model to be presented integrates both the real and financial aspects of post-keynesian economics in a dynamic framework where real output is demand determined, investment is driven by Minsky`s two price theory, money is endogenous, technical progress is determined by a Kaldorian technical progress function and net exports are an important component of aggregate demand. Domestic capitalists can store their wealth in foreign bonds, so there is imperfect mobility of capital. After the presentation of the basic structure of model, on can perform its computational simulation and, then, infer the dynamic trajectories of endogenous variables. Simulated trajectories reflect some general features of the dynamic of capitalists economies, especially the existence of irregular fluctuations of the growth rates of real output. The analysis of the external sector of the economy shows that the long-run dynamic interaction between the real exchange rates and the net exports generates a real exchange rate appreciation, a fall in net exports and also a reduction in the volatility of current account balance. Another important result that was obtained from the model is the increasing share of financial assets in national wealth. In other words, the model provides an economic result that suggests a growing share of financial assets in the capitalists` aggregate wealth of this economy.

JEL: E12, F43, E37.
Keywords: Open Economy Macroeconomics, Computational Economics, Simulation Models, Post-Keynesian Economics.



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