Firms’ rational expectations, workers’ psychology, and monetary policy in a behavioral real business cycle model
Gerasimos Soldatos () and
Economic Analysis and Policy, 2017, vol. 53, issue C, 129-139
This paper is based on cognitive psychology’s view of “curvilinear” optimism–pessimism and hence, contains a flavor of behavioral macroeconomics. The substructure of a real overlapping-generations business cycle model is assumed to be underlined by the long-term character of firms’ rational expectations. This model is combined with the workers’ “bell-shaped” optimism–pessimism about a fractional-reserve-banking economy. An exogenous shock will be propagated through this workers’ psychology. Policy-wise, the public sector is ignored and the only purpose of the monetary authority is to secure the efficiency of intergenerational income distribution in a business environment with zero full-employment general-equilibrium profit. Within this context, monetary policy is found to be in the spirit of the Old Chicago quantity theory in that monetary expansion is anti-recessionary, and the increase of the reserve ratio is shown to be anti-inflationary. It is a viewpoint with Chartalist flavor.
Keywords: Curvilinear mood; Economic activity; Monetary expansion; Old Chicago quantity theory; Chartalism (search for similar items in EconPapers)
JEL-codes: E03 E23 E31 E51 E52 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:53:y:2017:i:c:p:129-139
Access Statistics for this article
Economic Analysis and Policy is currently edited by Clevo Wilson
More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().