Unleashed Capitalism: The Starting Point for Societal Reform

Peter Flaschel and Alfred Greiner

in Flexicurity Capitalism

Published in print April 2012 | ISBN: 9780199751587
Published online May 2012 | e-ISBN: 9780199932825 | DOI:
Unleashed Capitalism: The Starting Point for Societal Reform

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Chapter 4 contrasts the situation of an ideal flexicurity economy with what can be called a model of unleashed capitalism. There, labor market and goods market disequilibria are analyzed in combination with the rate of return and capital gain oriented portfolio choice of asset holders. Balanced growth paths for this type of economy are discussed, their limited stability, on the one hand, and the cumulative forces that work around them, on the other hand, which create large swings in economic activity of business-cycle and also of long-wave frequency. The effectiveness of counter-cyclical fiscal and monetary policy rules in such a framework are studied which could turn the persistent fluctuations of the economy into damped ones.

Keywords: unleashed capitalism; disequilibria; balanced growth path; counter-cyclical fiscal policy; monetary policy rules

Chapter.  23443 words.  Illustrated.

Subjects: Economic Systems

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