Neo-Kaleckian models with financial cycles: A center-periphery framework

Abstract

The article develops a Neo-Kaleckian model that takes into account the impact of financial cycles on demand regimes. Both the financial instability hypothesis and the paradox of debt are considered, as well as both the upward and the downward phases of the economic cycle. The baseline model is insufficient to analyze financial variables in underdeveloped countries, as it does not take into consideration the non-neutrality of international financial markets. Following a center-periphery structure, we extend the model in order to discuss how financial movements in the periphery are mainly associated with external vulnerability. JEL codes : E11, E22, E44 Keywords : Minsky cycles, Neo-Kaleckian model, paradox of debt, center-periphery