  This paper empirically assesses predictions of Goodwin's model of cyclical
growth regarding demand and distributive regimes when integrating the real and
financial sectors. In addition, it evaluates how financial and employment
shocks affect the labor market and monetary policy variables over six different
U.S. business-cycle peaks. It identifies a parsimonious Time-Varying Vector
Autoregressive model with Stochastic Volatility (TVP-VAR-SV) with the labor
share of income, the employment rate, residential investment, and the interest
rate spread as endogenous variables. Using Bayesian inference methods, key
results suggest (i) a combination of profit-led demand and profit-squeeze
distribution; (ii) weakening of these regimes during the Great Moderation; and
(iii) significant connections between the standard Goodwinian variables and
residential investment as well as term spreads. Findings presented here broadly
conform to the transition to increasingly deregulated financial and labor
markets initiated in the 1980s.
