Corporate Debt, Rentiers’ Portfolio Dynamics, Instability and Growth: A Neo-Kaleckian Perspective

Considering a stock-flow consistent neo-Kaleckian macromodel of the post-COVID-19 US economy, along with firms’ debt dynamics, in the long run, we incorporate portfolio dynamics of rentiers and investigate the possibility dynamic (in)stability of the economy. Both the debt-led and the debt-burdened demand and growth regimes are possible. We find share buybacks, under certain conditions, not only may lead to the deterioration of the equilibrium rate of capital accumulation in the long-run but may also potentially destabilize the entire economy. A strictly regulated financial market is desirable, as otherwise, the economy may lose its stability and produces the limit cycles. A new paradox in neo-Kaleckian tradition, the paradox of share buybacks is also uncovered in this article.