The Classics, Keynes, and the Keynesians: A Unified Formalization

Lucas Llach and Pablo Schiaffino
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Lucas Llach: Universidad Torcuato Di Tella
Pablo Schiaffino: Universidad Torcuato Di Tella

Eastern Economic Journal, 2017, vol. 43, issue 3, No 9, 530-551

Abstract: Abstract We sketch a simple microfounded model that tries to capture the basic results of different macroeconomic schools by changing the values or behaviors of some parameter(s). The model has four different cases, which we label “Classical” (flexible prices and wages guaranteeing full employment), “Keynes’ Liquidity Trap” (a shortage of demand incapable of being corrected even with wage or price deflation), “Sticky-Price Keynesian,” and “Sticky-Wage Keynesian.” We associate each of these instances of our model with “textbook cases,” respectively: the labor-credit-money markets of the Classical case; Keynes–Krugman liquidity trap; the IS–LM model; and the AD–AS model.

Keywords: Keynes; The Classics; model; B1; B2; B4 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1057/eej.2015.56

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