On a Three-Sector Keynesian Model of Business Cycles

Abstract

In this study, we examined the effect of three-sector interaction on business cycles in Keynesian models. Specifically, we considered the durable, fast, and investment-goods sectors. We modified and extended Murakami’s two-sector Keynesian model of business cycles to a three-sector Keynesian model of business cycles. We investigated the conditions for the existence of equilibrium points. Moreover, we studied the stability of the equilibrium points on the basis of the concept of Routh–Hurwitz stability criterion. Finally, to support the analysis and the results obtained, we performed a numerical simulation on a specific example.