Abstract
This paper presents a long-run study of the relationship between autonomous and induced demand for the United States. Our exercise can be considered a contribution to the burgeoning literature revolving around autonomous demand-led growth models, which have displayed the potential to establish bridges not only within the post-Keynesian community, but also between post-Keynesian economics and other evolutionary and pluralistic approaches to economic growth. In particular, we study the long-run dynamic relationship between autonomous demand – which comprises R&D expenditures, government spending, exports and residential investment – and induced demand. Through a cointegration model with quantile-varying coefficients, we account for the possibility of changes in the relationship between the two variables and demonstrate that the long-run equilibrium relationship between autonomous and induced demand is robust to exogenous shocks and changes in the parameters.
This is a preview of subscription content, access via your institution.
Data availability
All data is publicly available.
Notes
For discussions about the theoretical consistency and empirical relevance of supermultiplier models, see also Pariboni (2016a), Portella-Carbó (2016), Dejuán (2017), Hein (2018), and Portella-Carbó and Dejuán (2019). It is important to notice that, in recent years, also authors coming from a Kaleckian theoretical tradition have developed analytical models whose main implications are analogous to those of the supermultiplier. See, e.g., Allain (2015), Lavoie (2016, 2017), Hein (2018), and Fiebiger and Lavoie (2019).
The other part is financed out of debt or accumulated wealth.
See also Cesaratto et al. (2003), Freitas and Serrano (2015), Girardi and Pariboni (2016, 2020), Pérez Caldentey and Vernengo (2017), and Palley (2019), where similar conceptualizations are adopted. It is, however, necessary to recall that autonomous demand-led growth models have been criticized by several authors, among which it is possible to mention Peter Skott, who questions the autonomy itself of autonomous demand, on the basis of the fact that also the latter, eventually, would be induced by output and income (Skott 2017). See also Nikiforos (2018).
There is, however, a relevant difference between the work by Nomaler et al. (2021) and ours. In the former, the authors focus on the supply-side determinants of R&D, while we emphasize its demand-side nature, as an act of spending and as a component of aggregate demand.
This reflects the assumption, common in the supermultiplier-inspired literature, that induced demand is a linear function of GDP.
We are aware that, for national accounting purposes, this demand component is included in investment, even though its nature is more akin to the purchase of a durable consumption good. See Pérez-Montiel and Pariboni (2022) for an empirical investigation of the role of residential investment as an autonomous growth driver in the US.
References
Albulescu CT, Bouri E, Tiwari AK, Roubaud D (2020) Quantile causality between banking Stock and real estate securities returns in the US. Quarterly Rev Econ Finance 78:251–260. https://doi.org/10.1016/J.QREF.2020.03.005
Allain O (2015) Tackling the instability of growth: a Kaleckian-Harrodian model with an autonomous expenditure component. Camb J Econ 39(5):1351–1371. https://doi.org/10.1093/cje/beu039
Allain O (2019) Demographic growth, Harrodian (in)stability and the Supermultiplier. Camb J Econ 43(1):85–106. https://doi.org/10.1093/cje/bex082
Allain O (2021) A Supermultiplier model of the natural rate of growth. Metroeconomica 72(3):612–634. https://doi.org/10.1111/MECA.12336
Balcilar M, Bekiros S, Gupta R (2017) The role of news-based uncertainty indices in predicting oil markets: a hybrid nonparametric quantile causality method. Empir Econ 53(3):879–889. https://doi.org/10.1007/S00181-016-1150-0/FIGURES/2
Balcilar M, Gupta R, Nguyen DK, Wohar ME (2018) Causal effects of the United States and Japan on Pacific-rim Stock markets: nonparametric quantile causality approach. Appl Econ 50(53):5712–5727. https://doi.org/10.1080/00036846.2018.1488062
Bortis H (1997) Institutions, behaviour, and economic theory : a contribution to classical-Keynesian political economy. Cambridge University Press
Brock WA, Scheinkman JA, Dechert WD, LeBaron B (1996) A test for Independence based on the correlation dimension. Econ Rev 15(3):197–235. https://doi.org/10.1080/07474939608800353
Caldentey EP, Vernengo M (2017) Wage-led, debt-led growth in an open economy. Revi Keynes Econ 5(3):307–335
Caminati M, Sordi S (2019) Demand-led growth with endogenous innovation. Metroeconomica 70(3):405–422. https://doi.org/10.1111/MECA.12243
Cavalli F, Naimzada AK, Pecora N (2019) Complex interplay between monetary and fiscal policies in a real economy model. Chaos, Solitons Fractals 128:318–330. https://doi.org/10.1016/J.CHAOS.2019.08.011
Cesaratto S (2016) The state spends first: logic, facts, fictions, open questions. J Post Keynesian Econ 39(1):44–71. https://doi.org/10.1080/01603477.2016.1147333
Cesaratto S, Serrano F, Stirati A (2003) Technical change, effective demand and employment. Rev Pol Econ 15(1):33–52. https://doi.org/10.1080/09538250308444
Chang CP, Lee CC, Hsieh MC (2015) Does globalization promote real output? Evidence from quantile Cointegration regression. Econ Model 44:25–36. https://doi.org/10.1016/J.ECONMOD.2014.09.018
Coleman W (1991) Harrod’s growth model and the multiplier–accelerator model: two sides of the same coin? Metroeconomica 42(3):199–211. https://doi.org/10.1111/J.1467-999X.1991.TB00368.X
le Corbeiller P (1936) The non-linear theory of the maintenance of oscillations. J Instit Electrical Eng 79(477):361–378. https://doi.org/10.1049/jiee-1.1936.0162
Dejuan Ó (2005) Paths of accumulation and growth: towards a Keynesian long-period theory of output. Rev Political Econ 17(2):231–252. https://doi.org/10.1080/09538250500067270
Dejuán Ó (2017) Hidden links in the warranted rate of growth: the Supermultiplier way out. The European Journal of the History of Economic Thought 24(2):369–394. https://doi.org/10.1080/09672567.2016.1186201
Deleidi M, Fontanari C, Gahn SJ (2023) Autonomous Demand and Technical Change: Exploring the Kaldor–Verdoorn Law on a Global Level. Econ Polit 1–24. https://doi.org/10.1007/S40888-023-00294-Y/FIGURES/4
Deleidi M, Mazzucato M (2019) Putting austerity to bed: technical Progress, aggregate demand and the Supermultiplier. Rev Polit Econ 31(3):315–335. https://doi.org/10.1080/09538259.2019.1687146
Deleidi M, Mazzucato M (2020) Directed innovation policies and the Supermultiplier: an empirical assessment of Mission-oriented policies in the US economy. Res Policy 104151. https://doi.org/10.1016/j.respol.2020.104151
di Domenico J, Russo A. 2022. Innovation, Growth, and Productivity Appropriation. How the Elites Learned to Stop Worrying and Love Public Debt. 2022/12. Castellon.
Duesenberry JJ (1950) Hicks on the trade cycle. Q J Econ 64(3):464. https://doi.org/10.2307/1884560
Fiebiger B, Lavoie M (2019) Trend and business cycles with external markets: non-capacity generating semi-autonomous expenditures and effective demand. Metroeconomica 70(2):247–262. https://doi.org/10.1111/meca.12192
Franke R (2018a) Can monetary policy tame Harrodian instability? Metroeconomica 69(3):593–618. https://doi.org/10.1111/MECA.12203
Franke R (2018b) Reviving Kalecki’s business cycle model in a growth context. J Econ Dyn Control 91:157–171. https://doi.org/10.1016/J.JEDC.2017.12.009
Freitas F, Serrano F (2015) Growth rate and level effects, the stability of the adjustment of capacity to demand and the Sraffian Supermultiplier. Rev Political Econ 27(3):258–281. https://doi.org/10.1080/09538259.2015.1067360
Gallegati M, Gardini L, Puu T, Sushko I (2003) Hicks’ trade cycle revisited: cycles and bifurcations. Math Comput Simul 63(6):505–527. https://doi.org/10.1016/S0378-4754(03)00060-0
Gallo E, Barbieri Goes MC (2023) Investment, autonomous demand and long run capacity utilization: an empirical test for the euro area. Econ Polit:1–31
Galvao AF (2009) Unit root quantile autoregression testing using covariates. J Econ 152(2):165–178. https://doi.org/10.1016/J.JECONOM.2009.01.007
Garegnani P (1978) Notes on consumption, investment and effective demand: I. Camb J Econ 2:335–353. https://doi.org/10.2307/23596466
Girardi D, Pariboni R (2016) Long-run effective demand in the US economy: an empirical test of the Sraffian Supermultiplier model. Rev Political Econ 28(4):523–544. https://doi.org/10.1080/09538259.2016.1209893
Girardi D, Pariboni R (2020) Autonomous demand and the investment share. Rev Keynes Econ 8(3):428–453. https://doi.org/10.4337/roke.2020.03.07
Girardi D, Meloni WP, Stirati A (2020) Reverse hysteresis? Persistent effects of autonomous demand expansions. Camb J Econ 44(4):835–869. https://doi.org/10.1093/cje/beaa009
Goodwin RM (1951) The nonlinear accelerator and the persistence of business cycles. Econometrica 19(1):1. https://doi.org/10.2307/1907905
Góes MCB, Deleidi M (2022) Output determination and autonomous demand multipliers: An empirical investigation for the US economy. Econ Model 116:106004
Haluska G, Braga J, Summa R (2021) Growth, investment share and the stability of the Sraffian Supermultiplier model in the U.S. economy (1985–2017). Metroeconomica 72(2):345–364. https://doi.org/10.1111/meca.12323
Harrod RF (1939) An essay in dynamic theory. Econ J 49(193):14–33. https://doi.org/10.2307/2225181
Hartley B (2022) Episodic incidence of Harrodian instability and the Kaleckian growth model: a Markov-switching approach. Metroeconomica 73(1):268–290. https://doi.org/10.1111/MECA.12366
Hein E (2018) Autonomous government expenditure growth, deficits, debt, and distribution in a neo-Kaleckian growth model. J Post Keynesian Econ 41(2):316–338. https://doi.org/10.1080/01603477.2017.1422389
Hein E, Jimenez V (2022) The macroeconomic implications of zero growth: a post-Keynesian approach. Eur J Econ Econ Pol: Interven 19(1):41–60. https://doi.org/10.4337/EJEEP.2022.01.05
Hein E, Woodgate R (2021) Stability issues in Kaleckian models driven by autonomous demand growth—Harrodian instability and debt dynamics. Metroeconomica 72(2):388–404. https://doi.org/10.1111/MECA.12325
Hein E, Lavoie M (2019) Post-Keynesian economics. In: Dimand RW, Hagemann H (eds) The Elgar companion to John Maynard Keynes. Edward Elgar Publishing
Heller PS, Porter RC (1978) Exports and growth: an empirical re-investigation. J Dev Econ 5:191–193
Hicks JR (1950) A contribution to the theory of the trade cycle. Oxford University Press
Hommes CH (1995) A reconsideration of Hicks’ non-linear trade cycle model. Struct Chang Econ Dyn 6(4):435–459. https://doi.org/10.1016/0954-349X(95)00032-I
Jeong K, Härdle WK, Song S (2012) A consistent nonparametric test for causality in quantile. Econ Theory 28(4):861–887. https://doi.org/10.1017/S0266466611000685
Jochmann M, Koop G (2015) Regime-switching Cointegration. Stud Nonlinear Dyn Econ 19(1):35–48. https://doi.org/10.1515/SNDE-2012-0064/PDF
Johansen S (1991) Estimation and hypothesis testing of Cointegration vectors in Gaussian vector autoregressive models. Econometrica 59(6):1551. https://doi.org/10.2307/2938278
Johansen S (1995) Likelihood-based inference in Cointegrated vector autoregressive models. Oxford University Press
Kalecki M (1968) Trend and business cycles reconsidered. Econ J 78(310):263. https://doi.org/10.2307/2229463
Kalecki M (1971) Selected essays on the dynamics of the capitalist economy 1933-1970
Koenker R, Xiao Z (2012) Unit root quantile autoregression inference. J Am Stat Assoc 99(467):775–787. https://doi.org/10.1198/016214504000001114
Krolzig HM (1997) Markov-switching vector autoregressions: modelling, statistical inference, and application to business cycle analysis. In: Lecture notes in economics and mathematical systems, vol 454. Springer, New York
Lavoie M (2016) Convergence towards the Normal rate of capacity utilization in neo-Kaleckian models: the role of non-capacity creating autonomous expenditures. Metroeconomica 67(1):172–201. https://doi.org/10.1111/meca.12109
Lavoie M (2017) Prototypes, reality and the growth rate of autonomous consumption expenditures: a rejoinder. Metroeconomica 68(1):194–199. https://doi.org/10.1111/meca.12152
Lavoie M, Godley W (2001) Kaleckian models of growth in a coherent Stock-flow monetary framework: a Kaldorian view. Journal of Post Keynesian Economics 24(2):277–311. https://doi.org/10.1080/01603477.2001.11490327
Lee CC, Zeng JH (2011) Revisiting the relationship between spot and futures oil prices: evidence from quantile Cointegrating regression. Energy Econ 33(5):924–935. https://doi.org/10.1016/J.ENECO.2011.02.012
Luxemburg R (1913) The accumulation of capital. Monthly Review Press, New York
Marques AM, Lima GT (2022) Testing for granger causality in quantiles between the wage share in income and productive capacity utilization. Struct Chang Econ Dyn 62:290–312. https://doi.org/10.1016/J.STRUECO.2022.04.002
Matsumoto A (2009) Note on Goodwin’s 1951 nonlinear accelerator model with an investment delay. J Econ Dyn Control 33(4):832–842. https://doi.org/10.1016/J.JEDC.2008.08.013
Médici F (2011) Un Análisis de Cointegración Del principio de La Demanda Efectiva En Argentina (1980-2007). Ensayos Económicos:103–141
Michaely M (1977) Exports and growth: an empirical investigation. J Dev Econ 4(1):49–53. https://doi.org/10.1016/0304-3878(77)90006-2
Morlin GS (2022) Growth led by government expenditure and exports: public and external debt stability in a Supermultiplier model. Struct Chang Econ Dyn. https://doi.org/10.1016/J.STRUECO.2022.03.009
Mourao PR, Popescu IA (2022) Revisiting a Macroeconomic Controversy: The Case of the Multiplier–Accelerator Effect. Economies 10:249. https://doi.org/10.3390/ECONOMIES10100249
Nah WJ, Lavoie M (2017) Long-run convergence in a neo-Kaleckian open-economy model with autonomous export growth. J Post Keynesian Econ 40(2):223–238. https://doi.org/10.1080/01603477.2016.1262745
Nah WJ, Lavoie M (2019) The role of autonomous demand growth in a neo-Kaleckian conflicting-claims framework’. Struct Chang Econ Dyn 51:427–444. https://doi.org/10.1016/j.strueco.2019.02.001
Nikiforos M (2018) Some comments on the Sraffian Supermultiplier approach to growth and distribution. J Post Keynesian Econ 41(4):659–675. https://doi.org/10.1080/01603477.2018.1486211
Nishiyama Y, Hitomi K, Kawasaki Y, Jeong K (2011) A consistent nonparametric test for nonlinear causality—specification in time series regression - ScienceDirect. J Econ 165(1):112–127
Nomaler Ö, Spinola D, Verspagen B (2021) R&D-based economic growth in a Supermultiplier model. Struct Chang Econ Dyn 59:1–19. https://doi.org/10.1016/J.STRUECO.2021.07.002
Nomaler Ö, Spinola D, Verspagen B (2022) Demand-led industrialisation policy in a dual-sector small balance of payments constrained economy. 18. Birmingham City University (Submitted)
Nomaler Ö, Spinola D, Verspagen B (2020) Schumpeter and Keynes: economic growth in a super-multiplier model. 2020–049. UNU-MERIT working papers, (2020-049).
Palley T (2019) The economics of the super-multiplier: a comprehensive treatment with labor markets. Metroeconomica 70(2):325–340. https://doi.org/10.1111/meca.12228
Pariboni R (2016a) Autonomous Demand and the Marglin–Bhaduri Model: A Critical Note. Rev Keynes Econ 4(4):409–428. https://doi.org/10.4337/roke.2016.04.04
Pariboni R (2016b) Household consumer debt, endogenous money and growth: a Supermultiplier-based analysis. PSL Quarterly Rev 69(278):211–233
Passarella MV (2019) From abstract to concrete: some tips for developing an empirical Stock-flow consistent model. Eur J Econ Econ Pol: Interven 16(1):55–93. https://doi.org/10.4337/ejeep.2019.0044
Perez-Montiel JA, Erbina CM (2020) Autonomous expenditures and induced investment: a panel test of the Sraffian Supermultiplier model in European countries. Rev Keynes Econ 8(2):220–239. https://doi.org/10.4337/roke.2020.02.05
Pérez-Montiel JA, Manera C (2020) Permanent Demand and Private Investment in the General Theory: An Empirical Investigation. Revista de Economia Mundial—J World Econ (54):107–128. https://doi.org/10.33776/rem.v0i54.3835
Pérez-Montiel JA, Manera C (2022) Is autonomous demand really autonomous in the United States? An asymmetric frequency-domain granger causality approach. Metroeconomica 73(1):78–92. https://doi.org/10.1111/MECA.12354
Pérez-Montiel JA, Pariboni R (2022) Housing is NOT ONLY the business cycle: a Luxemburg-Kalecki external market empirical investigation for the United States. Rev of Pol Econ 34(1):1–22. https://doi.org/10.1080/09538259.2020.1859718
Portella-Carbó F (2016) Effects of International Trade on Domestic Employment: An Application of a Global Multiregional Input–Output Supermultiplier Model (1995–2011). Econ Syst Res 28(1):95–117. https://doi.org/10.1080/09535314.2016.1142429
Portella-Carbó F, Dejuán Ó (2019) Trade imbalances and fiscal policy in the Eurozone: an analysis of economic interrelations with a global Supermultiplier input-output model. Camb J Econ 43(2):311–334. https://doi.org/10.1093/cje/bey011
Prante F, Hein E, Bramucci A (2022) Varieties and Interdependencies of Demand and Growth Regimes in Finance-Dominated Capitalism: A Post-Keynesian Two-Country Stock–Flow Consistent Simulation Approach. Rev Keynes Econ 10(2):264–290. https://doi.org/10.4337/ROKE.2022.02.07
Puu T (2007) The Hicksian trade cycle with floor and ceiling dependent on capital Stock. J Econ Dyn Control 31(2):575–592. https://doi.org/10.1016/J.JEDC.2005.12.004
Saikkonen P (1991) Asymptotically efficient estimation of Cointegration regressions. Econ Theory 7(1):1–21
Saikkonen P (1992) Estimation and testing of Cointegrated systems by an autoregressive approximation. Econ Theory 8(1):1–27. https://doi.org/10.1017/S0266466600010720
Saikkonen P, Luukkonen R (1997) Testing Cointegration in infinite order vector autoregressive processes. J Econ 81(1):93–126. https://doi.org/10.1016/S0304-4076(97)00036-5
Samuelson PA (1939) Interactions between the multiplier analysis and the principle of acceleration. Rev Econ Stat 21(2):75–78. https://doi.org/10.2307/1927758
Serrano F (1995) Long period effective demand and the Sraffian Supermultiplier. Contributions Polit Econ 14(1):67–90. https://doi.org/10.1093/oxfordjournals.cpe.a035642
Shafiullah M, Chaudhry SM, Shahbaz M, Reboredo JC (2021) Quantile causality and dependence between crude oil and precious metal prices. Int J Finance Econ 26(4):6264–6280. https://doi.org/10.1002/IJFE.2119
Sims CA, Stock JH, Watson MW (1990) Inference in linear time series models with some unit roots. Econometrica 58(1):113. https://doi.org/10.2307/2938337
Skott P (2017) Autonomous demand and the Harrodian criticisms of the Kaleckian model. Metroeconomica 68(1):185–193. https://doi.org/10.1111/meca.12150
Soete LLG, Verspagen B, Ziesemer THW (2019) The productivity effect of Public R&D in the Netherlands. Econ Innov New Technol 29(1):31–47. https://doi.org/10.1080/10438599.2019.1580813
Soete L, Verspagen B, Ziesemer THW (2022) Economic impact of Public R&D: an international perspective. Ind Corp Chang 31(1):1–18. https://doi.org/10.1093/ICC/DTAB066
Sushko I, Gardini L, Puu T (2010) Regular and chaotic growth in a Hicksian floor/ceiling model. J Econ Behav Organ 75(1):77–94. https://doi.org/10.1016/J.JEBO.2010.01.007
Teixeira L, Petrini G (2023) Long-run effective demand and residential investment: a Sraffian Supermultiplier based analysis*. Rev Keynes Econ 11(1):72–99. https://doi.org/10.4337/ROKE.2023.01.05
Troster V, Shahbaz M, Uddin GS (2018) Renewable energy, oil prices, and economic activity: a granger-causality in quantiles analysis. Energy Econ 70:440–452. https://doi.org/10.1016/J.ENECO.2018.01.029
Vercelli A, Sordi S (2009) Genesis and evolution of the multiplier–accelerator model in the years of high theory
Xiao Z (2009) Quantile Cointegrating regression. J Econ 150(2):248–260. https://doi.org/10.1016/J.JECONOM.2008.12.005
Zambelli S (2011) Flexible accelerator economic systems as coupled oscillators. J Econ Surv 25(3):608–633. https://doi.org/10.1111/J.1467-6419.2010.00664.X
Ziesemer THW (2023) Mission-Oriented R&D and growth of Japan 1988–2016: a comparison with private and Public R&D. Econ Innov New Technol 1–30. https://doi.org/10.1080/10438599.2022.2164493
Funding
This work has been carried out thanks to the financial support of the research projects: (a) J.A. Perez-Montiel received financial support from PGC 2018-093896-B-I00 Mediterranean capitalism? Successes and failures of industrial development in Spain, 1720-2020 funded by Ministerio de Ciencia e Innovación (Madrid), MCIN/AEI/ 10.13039/501100011033; and by the European Regional Development Fund, “ERDF A way of making Europe”; (b) A. Sansó acknowledges financial support from Spanish Ministerio de Ciencia e Innovación under grand PID2020-114646RB-C43/MCIN/AEI/10.13039/501100011033.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Ethical standards
We comply with all ethical standards of the Journal of Evolutionary Economics.
Conflict of interest
None.
Ethical conduct
The paper was conducted in line with the ethical standards of Journal of Evolutionary Economics.
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Pérez-Montiel, J.A., Sansó, A., Ozcelebi, O. et al. Autonomous and induced demand in the United States: a long-run perspective. J Evol Econ 33, 1237–1257 (2023). https://doi.org/10.1007/s00191-023-00833-7
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00191-023-00833-7