Disequilibrium as the origin, originality, and challenges of Clower's microfoundations of monetary theory

Romain Plassard

MPRA Paper from University Library of Munich, Germany

Abstract: Robert W. Clower’s article “A Reconsideration of the Microfoundations of Monetary Theory” (1967) deeply influenced the course of modern monetary economics. On the one hand, it questioned Don Patinkin’s (1956) project to integrate monetary and Walrasian value theory. On the other hand, it was the fountainhead of the cash-in-advance models à la Robert J. Lucas (1980), one of the most widely used approaches to monetary theory since the 1980s. Despite this influence, Clower’s (1967) project to integrate monetary and value theory remains an enigma. My paper intends to resolve it. This is a difficult task since Clower never completed the monetary theory outlined in his 1967 article. To overcome this difficulty, I characterize the intellectual context from which Clower’s (1967) contribution emerged and have recourse to a reconstruction of his project. This reconstruction is based on the analysis of published and unpublished materials, written by Clower before and after the 1967 article. It is argued that Clower (1967) sought to elaborate a disequilibrium monetary theory whilst retaining the two pillars of Patinkin’s integration, i.e., the introduction of money into utility functions and the real-balance effect. I trace the origins, account for the originality, and discuss the challenges of this project.

Keywords: integration of monetary and value theory; microfoundations of macroeconomics; disequilibrium; Clower; Patinkin. (search for similar items in EconPapers)
JEL-codes: B21 D46 D5 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mon and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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