Tobin's `A Dynamic Aggregative Model': An analytical interpretation

Abstract

In the attempt of arguing against the conclusion achieved by Harrod and Domar on the stability of growth, Tobin proposes in 1955 a `Dynamic Aggregative Model' which takes into consideration a monetary sector and a neoclassical two factors production function. Despite this model has received along the years a more accurate and advanced elaboration thanks to the theoretical developments achieved by Tobin on the analysis of the portfolio choices, on the investment decision and on the methodology which formalises the interactions between real and financial markets, the 1955 framework remains a benchmark for the specification of the financial sector in much of the Tobin's work in macroeconomic theory. However, in the light of the more advanced works developed by Tobin, the 1955's model presents some specification problems that have not been noticed in the literature.