Nonlinear Phillips curves, complex dynamics and monetary policy in a Keynesian macro model (Q1433622)

The authors show that a proper Keynesian version of AS-AD growth dynamics demands at least six laws of motion that integrate prominent feedback chains of Keynesian macrodynamics. They show that the steady state of these dynamics with their standard PC's is asymptotically stable. An estimation of the parameters of the dynamics indeed shows that mildly explosive forces around the steady state may be given in reality. The basic conjecture of the authors for future research is that steady states of Keynesian macrodynamics are typically surrounded by centrifugal forces which come to a halt and give a way to more or less complex real and nominal fluctuations if in particular an important nonlinearity, the kink in the money wage Phillips curve, come into operation. One important finding of the paper is that, given the authors parameter estimates, the four feedback channels of the model, the Keynes, Mundell, Metzler and the Rose feedback chains, are such that the Rose adverse-type real wage adjustment dominates the stabilizing Keynes-effect and the stabilizing dynamic multiplier -- here coupled with a weak inventory accelerator. The destabilizing Mundell-effect is also found to be weak.