On the stability of a certain Keynes-Metzler-Goodwin monetary growth model

The arctile has three aims. The rfist aim is to develop an im proved version of the Keynes-Metzler-Goodwin (the KMG) monetary growth model originally presented and analysed in a series of publications by Carl Chiarella, Peter Flaschel and Willi Semler. The improvement of the model is obtained by modifying some of its equations in a way which ensures that they reflect real macroeconomic dependencies more properly. The equations that have been modified describe nifal demand expectaotins, determinants of producotin de cisions, fixed capital accumulation, tax revenues, govern ment budget deficit and money demand. The second aim is to transform the model into an intensive form described by seven non-linear diefrenatil equaotins and determine its unique steady state which shows proporotins between vari ables on the balanced growth path. The third ultimate aim is to present a mathematical proof that the new improved version of the KMG model is locally asymptotically stable.