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- Title
Money, Growth and Disequilibrium.
- Authors
Azam, J. P.
- Abstract
The analysis of the trilogy of the title receives an increasing attention in the literature. Malinvaud (1980) analyses the dynamics of a disequilibrium model with a fixed-coefficients technology and an investment function that is common to all disequilibrium regimes. His main conclusion is that only Keynesian equilibria are stable in the long run. Laussel (1980) generalizes this model by relaxing these two assumptions. Several cases appear in his model, but Malinvaud's conclusion is in general vindicated. The present paper shows how a strong wealth effect can stabilize the other types of steady states. <BR> However, a complete analysis of the investment function involves a multiplication of the number of disequilibrium regimes. This follows from the role of expectations in investment behavior Firms must take into account the various cases of disequilibrium they will have to face before reaching their target capital stock. This reduces the, attractiveness of the disequilibrium model as a tool for macroeconomic analysis, because of its exaggerated complexity. <BR> Following the tradition of neoclassical growth theory, we sidestep this issue and consider a two-asset--money and capital--world, as Tobin (1961, 1969) advocated. B<oum>hm (1978) has analyzed the dynamics of money in a disequilibrium framework, but his model ignores capital accumulation. By contrast, our present model puts the emphasis on portfolio equilibrium, somewhat in the IS--LM tradition (Tobin, 1969). <BR> We assume an economy without corporate veil, where profits are wholly received as dividends by households. In B<oum>hm's model these profits are taxed away by the government, while Barro and Grossman (1976), Malinvaud (1977) and Laussel (1980) assume a fixed interest rate. In our model, firms take the real wage rate as given, and determine the rate of interest by paying dividends to their owners.
- Subjects
ECONOMIC equilibrium; INVESTMENTS; CAPITAL stock; MONEY; MALINVAUD, Edmond, 1923-2015; CORPORATION law
- Publication
Economica, 1983, Vol 50, Issue 199, p325
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2553974