Effective Demand in the Recent Evolution of the U.S. Economy

This paper puts forward the notion that the recent evolution of the U.S. economy can be fully explained by demand-side variables. The authors empirically test some hypotheses about the role of fiscal and monetary policies and of income distribution in shaping effective demand. Using a rigorous econometric analysis, they estimate a macroeconomic model, test the validity of its probability and underlying statistical assumptions, and conclude that fiscal and monetary variables, together with the wage share, do in fact influence effective demand and thus shape the overall evolution of the U.S. economy.