Prolegomena to Realistic Monetary Macroeconomics: A Theory of Intelligible Sequences

Wynne Godley and Marc Lavoie

Economics Working Paper Archive from Levy Economics Institute

Abstract: This paper sets out a rigorous basis for the integration of Keynes-Kaleckian macroeconomics (with constant or increasing returns to labor, multipliers, mark-up pricing, etc.) with a model of the financial system (comprising banks, loans, credit money, equities, etc.), together with a model of inflation. Central contentions of the paper are that, with trivial exceptions, there are no equilibria outside financial markets, and the role of prices is to distribute the national income, with inflation sometimes playing a key role in determining the outcome. The model deployed here describes a growing economy that does not spontaneously find a steady state even in the long run, but which requires active management of fiscal and monetary policy if full employment without inflation is to be achieved. The paper outlines a radical alternative to the standard narrative method used by post-Keynesians as well as by Keynes himself.

Date: 2006-02
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pke
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_441

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