Endogenous expectations, investment’s dual effects and effective demand: a theoretic exercise

Abstract

This article aims to show that, in the analysis of shot-term economic dynamics, a la Kregel (1976), the fl uctuations are explosive, because it focuses on the investments’ demand-effect, even though it recognizes the endogenous nature of long-term expectations. However, the article shows that, in a long-term dynamics, based on the effective demand principle, regarding the investments’ capacity-effect and the existence of mechanisms of turning-points, the system alternates between recessive and expansive phases of income.