THE FINANCIAL SECTOR IN THE FINANCIAL ECONOMY

Jagdish Handa

Chapter 6 in A Reformulation of Keynesian Economics, 2015, pp 283-361 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The financial crisis starting in 2007 in the USA illustrated the vital role of funds (financial capital) at the disposal of economic agents in determining macroeconomic outcomes. As this experience has demonstrated, money “matters” in the sense that it affects real economic activity. So do credit and bonds. Further, credit and bonds do so in different ways than money, and credit does so in a different way than bonds. Unfortunately, most of the macroeconomic models (broadly represented by the (IS-LM), (AD–AS) models and their variants) in the literature do not reflect these divisions among the financial assets, the impact of financial variables on output, or the distinctive impact of money, credit and bonds on output in the modern economy…

Keywords: Macroeconomics; Keynesian Economics; Monetary Economics (search for similar items in EconPapers)
Date: 2015
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