This note reconsiders a recent proposal by A. Shaikh to tame Harrodian instability (Metroeconomica 2009), where besides the utilization gap investment depends on the expected growth of demand. His stability result has, however, been criticized as not credible. The crucial point is that Shaikh's continuous-time treatment does not distinguish between forward and backward derivatives. In order to check whether or not this poses a problem, several slight modifications of the model in continuous and discrete time are formulated and investigated for their stability. Roughly speaking, it is found that unless one assumes (myopic) perfect foresight, the destabilizing Harrodian mechanism continues to be effective.

The paper considers the dynamic adjustments of an average opinion index that can be derived from a microfounded framework where the individual agents switch between two kinds of sentiment with certain transition probabilities. The index can thus represent a general business climate, i.e., expectations about the future course of the economy. This approach is empirically tested with the survey expectations published by the ZEW and ifo institute. The estimated coefficients make economic sense and are highly significant. In particular, besides effects from fundamental data like the output gap in the recent past, one can identify a strong herding mechanism within both panels, such that the agents do not just join the majority but, metaphorically speaking, follow each single motion of the crowd. In addition, the transition probabilities of the ZEW agents are found to be influenced by the ifo climate but not the other way around.

The Keynesian stability condition is a necessary assumption for the IS equilibrium concept to make economic sense. With reasonable values for the saving parameter(s), however, it typically implies excessively strong multiplier effects. This is more than a cosmetic issue, not least because any simulation study of an otherwise ambitious model will thus be fraught with severe problems along some of its dimensions. The present paper demonstrates that by introducing proportional tax rates on production, corporate income and personal income, the multipliers will be considerably dampened. Within an elementary Kaleckian framework, it also advances a fairly satisfactory numerical calibration.

This note considers Tobin's average Q in a framework where firms finance investment by equities and debt. The determination of its long-run equilibrium value Q° is based on positing equality of the loan rate and, adjusted for a risk premium, the return on equities. Q° can thus be characterized as a ratio of two rates representing the somewhat modified interest costs and profits of the firms. The familiar benchmark value Q° = 1 obtains if another condition on the risk premium holds true, which may or may not be the case. An elementary numerical check demonstrates that possible deviations of Q° from unity are not overly dramatic.