Autonomous and induced demand in the United States between 1960-2019: A long-run approach

Abstract This paper presents a long-run study of the relationship between autonomous and induced demand spanning 1960–2019 for the United States. Our exercise can be considered a contribution to the burgeoning empirical literature revolving around autonomous demand-led growth models, which have displayed the potential to establish bridges not only within the Post- Keynesian community, but also between Post- Keynesian economics and other evolutionary and pluralistic approaches to economic growth. In particular, we study the long-run dynamic relationship between autonomous demand - which comprises R&D expenditures, government spending, exports and residential investment - and induced demand. Through a cointegration model with quantile-varying coefficients, we account for the possibility of changes in the relationship between the two variables of interest and demonstrate that the long-run equilibrium relationship between autonomous and induced demand is robust to exogenous shocks and changes in the parameters.