Equilibrium Model in a Monetary Economy

Gancho Ganchev

Economic Thought journal, 2010, issue 7, 97-115

Abstract: The paper consists of three parts. In the first part a monetary economy, based on credit money, is introduced. All financial instruments are considered as substitutes for money. In the second part the possibility of equilibrium convergence, under certain conditions, is studied. The conclusion is that that the equilibrium convergence requires monetary velocity acceleration. The velocity of money is introduced as complex variable derived as solution of a matrix equation and implying the existence of closed money circulation cycles. The third part is dedicated to interplay between the real and the financial sectors under the process of equilibrium convergence and economic stabilization. Keynesian, monetarist and real business cycle type of stabilization are studied. The conclusion about the possibility of destabilizing role of financial sector is drawn.

JEL-codes: E19 (search for similar items in EconPapers)
Date: 2010
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