A study of a debt-influenced equilibrium of the Keen model

Abstract

The Keen model is a mathematical model that describes the dynamic evolution of wages, employment, and debt based on the known Minsky's Financial Instability Hypothesis. It consists of three first order nonlinear ordinary differential equations. There exists an equilibrium state that corresponds to a collapse of both wage and employment but certain debts remain. In this paper, we construct an example in which this equilibrium appears to be stable. More interestingly, the debt becomes negative, which indicates some source of income without laboring.