Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth

Contents......Page 6
Notations Used in the Book......Page 10
List of Tables......Page 19
List of Figures......Page 21
Preface......Page 35
1.1 Two paradigms......Page 46
1.2 Aspiration......Page 49
1.3 Endeavour......Page 54
1.4 Provenance......Page 56
1.5 Some links with the ‘old’ Yale school......Page 58
1.6 Links with the post-Keynesian school......Page 61
1.7 A sketch of the book......Page 63
A1.1 Compelling empirical failings of the neo-classical production function......Page 65
A1.2 Stock-flow relations and the post-Keynesians......Page 66
2.1 Coherent stock-flow accounting......Page 68
2.2 Balance sheets or stock matrices......Page 70
2.3 The conventional income and expenditure matrix......Page 78
2.4 The transactions flow matrix......Page 82
2.5 Full integration of the balance sheet and the transactions flow matrices......Page 88
2.6 Applications of the transactions flow matrix: the monetary circuit......Page 92
3.1 Government money versus private money......Page 102
3.2 The service economy with government money and no portfolio choice......Page 103
3.3 Formalizing Model SIM......Page 106
3.4 A numerical example and the standard Keynesian multiplier......Page 113
3.5 Steady-state solutions......Page 116
3.6 The consumption function as a stock-flow norm......Page 119
3.7 Expectations mistakes in a simple stock-flow model......Page 123
3.8 Out of the steady state......Page 128
3.9 A graphical illustration of Model SIM......Page 133
A3.1 Equation list of Model SIM......Page 136
A3.3 The mean lag theorem......Page 137
A3.4 Government deficits in a growing economy......Page 140
4.2 The matrices of Model PC......Page 144
4.3 The equations of Model PC......Page 147
4.4 Expectations in Model PC......Page 152
4.5 The steady-state solutions of the model......Page 156
4.6 Implications of changes in parameter values on temporary and steady-state income......Page 161
4.7 A government target for the debt to income ratio......Page 169
A4.2 Equation list of Model PC with expectations (PCEX)......Page 171
A4.3 Endogenous money......Page 172
A4.4 Alternative mainstream closures......Page 174
5.2 The value of a perpetuity......Page 176
5.3 The expected rate of return on long-term bonds......Page 177
5.4 Assessing capital gains algebraically and geometrically......Page 179
5.5 Matrices with long-term bonds......Page 181
5.6 Equations of Model LP......Page 182
5.7 The short-run and long-run impact of higher interest rates on real demand......Page 195
5.8 The effect of household liquidity preference on long rates......Page 198
5.9 Making government expenditures endogenous......Page 205
A5.1 Equations of Model LP......Page 210
A5.2 The liquidity trap......Page 212
A5.3 An alternative, more orthodox, depiction of the bond market......Page 213
6.1 A coherent framework......Page 215
6.2 The matrices of a two-region economy......Page 216
6.3 The equations of a two-region economy......Page 218
6.4 The steady-state solutions of Model REG......Page 221
6.5 Experiments with Model REG......Page 225
6.6 The matrices of a two-country economy......Page 232
6.7 The equations of a two-country economy......Page 236
6.8 Rejecting the Mundell–Fleming approach and adopting the compensation approach......Page 239
6.9 Adjustment mechanisms......Page 246
6.10 Concluding thoughts......Page 252
A6.1 Equations of Model REG......Page 254
A6.2 Equations of Model OPEN......Page 256
A6.3 Historical and empirical evidence concerning the compensation principle......Page 258
A6.4 Other institutional frameworks: the currency board......Page 259
A6.5 How to easily build an open model......Page 260
7.1 Private money and bank loans......Page 262
7.2 The matrices of the simplest model with private money......Page 263
7.3 The equations of Model BMW......Page 267
7.4 The steady state......Page 272
7.5 Out-of-equilibrium values and stability analysis......Page 278
7.6 The role of the rate of interest......Page 285
A7.1 The equations of Model BMW......Page 292
8.1 The role of time......Page 295
8.2 The measure of profits......Page 297
8.3 Pricing......Page 308
8.4 Numerical examples of fluctuating inventories......Page 321
A8.1 A Numerical example of inventory accounting......Page 323
9.1 Introduction......Page 329
9.2 The equations of Model DIS......Page 330
9.3 Additional properties of the model......Page 338
9.4 Steady-state values of Model DIS......Page 340
9.5 Dealing with inflation in (a slightly modified) Model DIS......Page 345
A9.1 Equation list of Model DIS......Page 353
A9.2 The peculiar role of given expectations......Page 355
A9.3 Equation list of Model DISINF......Page 357
10.1 A model with active commercial banks......Page 359
10.2 Balance sheet and transaction matrices......Page 360
10.3 Producing firms......Page 363
10.4 Households......Page 367
10.5 The government sector and the central bank......Page 376
10.6 The commercial banking system......Page 378
10.7 Making it all sing with simulations......Page 387
A10.1 Overdraft banking systems......Page 419
A10.2 Arithmetical example of a change in portfolio preference......Page 421
11.1 Prolegomena......Page 423
11.2 Balance sheet, revaluation and transactions-flow matrices......Page 424
11.3 Decisions taken by firms......Page 428
11.4 Decisions taken by households......Page 437
11.5 The public sector......Page 442
11.6 The banking sector......Page 444
11.7 Fiscal and monetary policies......Page 449
11.8 Households in the model as a whole......Page 467
11.9 Financial decisions in the model as a whole......Page 480
11.10 A concluding recap......Page 486
12.1 Introduction......Page 490
12.2 The two matrices......Page 491
12.3 Equations of the generic model......Page 495
12.4 Alternative closures......Page 507
12.5 Experiments with the main fixed exchange rate closure......Page 511
12.6 Experiments with alternative fixed exchange rate closures......Page 517
12.7 Experiments with the flexible exchange rate closure......Page 523
12.8 Lessons to be drawn......Page 532
A12.1 A fundamental and useful open-economy flow-of-funds identity......Page 535
A12.2 An alternative flexible exchange rate closure......Page 537
13.1 Unique features of the models presented here......Page 538
13.2 A summary......Page 544
References......Page 546
B......Page 559
C......Page 560
D......Page 561
E......Page 562
G......Page 563
I......Page 565
J......Page 566
L......Page 567
N......Page 568
O......Page 569
P......Page 570
R......Page 571
S......Page 572
T......Page 573
W......Page 574
Z......Page 575