Monetary and Fiscal Dynamics

The analysis will be conducted within an IS-LM model augmen- ted by the dynamics of money wages, private capital and public debt. A macroeconomic shock induces an extended process of adjustment that is characterized by unemployment. This in turn requires a dynamic path of monetary and fiscal policy: As a response to the shock, the central bank continuouslyadapts the quantity of money so as to keep up full employment all the time. And the government continuously accommodates its purchases of goods and services. Can this be sustained? Or will public debt tend to explode, thereby driving the stock of capial down to zero?

Contenu

I. Basic Model.- 1. Overlapping Generations.- 2. Short-Run Equilibrium.- 3. IS-LM and AD-AS Diagrams.- 4. Long-Run Equilibrium.- 5. Stability.- 6. Monetary Shock.- 7. Savings Shock.- 8. Demographic Shock.- 9. Investment Shock.- 10. Wage Shock.- 11. Flexible Money Wages.- 12. Fixed Money Wages.- 12.1. Stability.- 12.2. Macroshocks.- 13. Monetary Policy.- 14. Cyclical Adjustment.- II. Economy with Public Sector.- 1. Overlapping Generations.- 2. Short-Run Equilibrium.- 3. Long-Run Equilibrium.- 4. Flexible Money Wages.- 4.1. Stability.- 4.2. Macroshocks.- 5. Fixed Money Wages.- 5.1. Stability.- 5.2. Macroshocks.- 6. Slow Money Wages.- 7. Continuous Budget Balance.- 8. Monetary Policy.- 9. Fiscal Policy.- 9.1. Stability.- 9.2. Macroshocks.- 10. Monetary Policy versus Fiscal Policy.- III. Growing Economy.- 1. Solow Model.- 2. Short-Run Equilibrium.- 3. IS-LM and AD-AS Diagrams.- 4. Long-Run Equilibrium.- 5. Stability.- 6. Monetary Shock.- 7. Savings Shock.- 8. Investment Shock.- Conclusion.- Result.- Symbols.- References.