Reviving Kalecki's business cycle model in a growth context

In 1935 Kalecki formulated the first fully specified model of a macroeconomic dynamics in which he studied an endogenous and most elementary business cycle mechanism. To revive his insights, the present paper adapts his stationary economy to a growth context. Introducing a reasonable nonlinearity into the investment function, it then takes care that the model exhibits persistent cyclical behaviour that is characterized by a unique, globally attracting limit cycle. This feature is a robust property. A calibration of the numerical parameters achieves desired values for the cycle period as well as the amplitudes of the output-capital ratio and the capital growth rate. It is moreover demonstrated that a one-time shock to the dynamics can easily have long-lasting effects on the amplitudes. Despite common misgivings about delay differential equations (which here result from Kalecki's implementation lag), the analysis can be conducted with a limited mathematical effort.