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<p>This paper devises an elementary Keynesian macro model in which: (i) Entrepreneurs are spread over a sentiment distribution; (ii) Individual positions in the distribution determine whether the selected level of investment is high, low, or zero; (iii) The entire sentiment distribution shifts in response to macro performance. The proposed framework materializes into a two-dimensional system of difference equations, from which one extracts relevant insights: (i) Two steady states are generated, one representing full employment and another one in which output remains below potential; (ii) The two steady states cannot be simultaneously stable; (iii) Both the neoclassical and the Keynesian equilibria may abandon the stability region if the investors’ sentiments change fast; (iv) Loss of stability culminates in regions of bounded instability characterized by aperiodic cycles and chaotic motion. The framework allows for approaching the impact of fiscal and monetary policies.</p>

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Heterogeneous Entrepreneurial Will and Aggregate Fluctuations: A Reassessment of the Standard Keynesian Macro Model

  • 期刊论文

  • 发表日期：

    2025年1月22日

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  • Orlando Gomes

摘要

This paper devises an elementary Keynesian macro model in which: (i) Entrepreneurs are spread over a sentiment distribution; (ii) Individual positions in the distribution determine whether the selected level of investment is high, low, or zero; (iii) The entire sentiment distribution shifts in response to macro performance. The proposed framework materializes into a two-dimensional system of difference equations, from which one extracts relevant insights: (i) Two steady states are generated, one representing full employment and another one in which output remains below potential; (ii) The two steady states cannot be simultaneously stable; (iii) Both the neoclassical and the Keynesian equilibria may abandon the stability region if the investors’ sentiments change fast; (iv) Loss of stability culminates in regions of bounded instability characterized by aperiodic cycles and chaotic motion. The framework allows for approaching the impact of fiscal and monetary policies.