Abstract for: The Long-Run Endogenous Money ASD Model of the Debt Money System (Part III) – Paradigm Shift in Economics As A Science
This is the third paper of our ongoing research series on Keynesian macroeconomic models. In Part I, we have shown that the endogenous money spending hypothesis explains the Great Depression. The Part I model, however, failed to explain the case of Japan’s lost 30 years. In Part II, by expanding the IS-LM model with budget equations, we have demonstrated that the endogenous money ASD (Accounting System Dynamics) model produces the behaviors of Japan’s case as well as the Great Depression. The Keynesian models introduced in Part I and II, however, have so far neglected neoclassical long-run view of macroeconomics with capital accumulation and production function. In Part III, we further expand the Part II model into a long-run endogenous money ASD model and demonstrate the model has features of both Neoclassical and Keynesian theories in terms of price adjustment mechanism and income determination. The Part III model has also captured the case of Japan’s lost 30 years qualitatively. Accordingly, the long-run endogenous money ASD model developed in Part III provides the alternative Neoclassical-Keynesian synthesis that is consistent with the current debt money system, and that fully embodies our paradigm shift in economics as a science.