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Edited by Mark Setterfield

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Edited by Mark Setterfield

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Edited by Mark Setterfield

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Mark Setterfield

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Mark Setterfield

This paper discusses the treatment of growth as a path-dependent process in post-Keynesian macrodynamics. A synthetic post-Keynesian growth model is used to demonstrate the ways in which growth can be described as path-dependent in the post-Keynesian tradition. Recent developments in neoclassical endogenous growth theory are then discussed, with a view to highlighting the sense in which these developments encroach on the post-Keynesian treatment of growth as demand-led and path-dependent. Finally, the paper reflects on the pros and cons of these neoclassical developments for the future of post-Keynesian macrodynamics.

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Yun K. Kim, Mark Setterfield and Yuan Mei

We develop a Keynesian model of aggregate consumption. Our theory emphasizes the importance of the relative income hypothesis and debt finance for understanding household consumption behavior. It is shown that particular importance attaches to how net debtor households service their debts, and that the treatment of debt-servicing commitments as a substitute for savings by these households creates the potential for ‘sudden stops’ in consumption spending (and hence aggregate demand).