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Financial Markets and the Instability of General Equilibrium

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  • Franz Gehrels

Abstract

The Hicksian general equilibrium with money and securities is the starting point for an expansion with numerous other financial variables. Disturbances to the system, partly observed from recent experience, are examined, and possible remedies are proposed. Walras’ Law, that the sum of excess demands for goods and basic factors is zero, no longer applies in an economy where financial variables are present. The main analysis is of a closed economy; the open economy, in the manner introduced by Mosak, is treated in an appendix. Copyright International Atlantic Economic Society 2009

Suggested Citation

  • Franz Gehrels, 2009. "Financial Markets and the Instability of General Equilibrium," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(4), pages 327-333, December.
  • Handle: RePEc:kap:atlecj:v:37:y:2009:i:4:p:327-333
    DOI: 10.1007/s11293-009-9191-9
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    References listed on IDEAS

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    1. Thomas J. Sargent, 2008. "Evolution and Intelligent Design," American Economic Review, American Economic Association, vol. 98(1), pages 5-37, March.
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    More about this item

    Keywords

    General equilibrium; Financial markets; Disturbances; E12; E13; G10;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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