Money, interest, and stagnation
Subtitle: dynamic theory and Keynes's economics
By: Yoshiyasu Ono.
Publisher: Clarendon Press; Oxford University Press
Published: 1994
Place of publication: Oxford; New York
Language: eng
Number of pages: 202
Subjects: Money; Monetary policy; Interest rates; Keynesian economics; Equilibrium (Economics)
Description: Focusing on Keynes's view on the utility of money in macroeconomic theory, Professor Ono provides new insight into modern dynamic macroeconomics. He sets out a new theoretical explanation of disequilibrium in markets, drawing on work first put forward by Keynes, but using the neoclassical theoretical tools of optimisation and intertemporal models.

The Keynesian IS-LM analysis is still widely used by policymakers, but most theorists criticise it because it lacks a microeconomic foundation. When analysing disequilibrium phenomena, theorists emphasise market distortions and examine various mechanisms which prevent prices from attaining equilibrium.

Using a dynamic optimisation model without market distortions, Professor Ono focuses on the role of interest rates and investigates persistent effective demand shortage as a monetary phenomenon in a completely new way. He argues that since the utility of money holding is insatiable, the economy may not reach equilibrium and then persistent stagnation occurs.

This stagnation thus has a microeconomic foundation, and is not a result of market imperfections, or imperfect knowledge leading to an expectations bias - both traditional neoclassical explanations of market disequilibrium. Finally, the implications for the dynamics of this economy, and the efficacy of governmental policies to stimulate effective demand are also considered.
Notes: Includes bibliographical references (p. [186]-194) and index.