The general theory of employment at 86: some empirical evidence

Abstract

In this paper we develop an empirically testable version of the General Theory of Employment. We model it using a simultaneous system of equations, and estimate this system with three-stage least-squares (3SLS). Our results indicate that present income is the main driver of consumption, the transaction motive dominates in the liquidity preference, the major determinant of investment is the state of long-term expectations, and employment is principally pushed by private investment spending

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