Institutional Hierarchy Hypothesis, Multilayered Adjustment, and Macroeconomic Performance: A Post-Keynesian Dynamic Approach

Abstract

This paper examines macrodynamics in an open economy, while taking institutional hierarchy hypothesis and viewpoint of multilayered adjustment into consideration. The institutional hierarchy hypothesis means that particular institutional forms impose their logic on the institutional architecture as a whole, leading its dominant impact on the macroeconomic performance. On the other hand, the viewpoint of multilayered adjustment emphasizes spatially and horizontally multilevel adjustments in economy as well as complex of institutional and market adjustments. Section 1 reconsiders the importance of this hypothesis and multilayered adjustment for macroeconomic performance. Then, section 2 introduces economic activities which institutional hierarchy hypothesis recently supposes into a post-Keynesian dynamic model. Section 3 examines economic growth pattern, dynamic stability, and the determination of employment. By way of a dynamic analysis considering institutional hierarchy, this paper indicates that the institutions might not always combine so as to lead to a high economic growth, and emphasizes the importance of focusing on not only one institutional form, but also plural institutional forms. Moreover, in terms of multilayered adjustment, this article reveals that institutional adjustments work in different time horizon, which also concerns the dynamic performance.