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Modigliani and Keynes

Author

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  • Robert M. Solow

    (MIT, Department of Economics, Cambridge, Mass. (USA))

Abstract

The first article published by Franco Modigliani has become one of the basic texts of the modern Keynesian economics. It formalized the model (or at least one model) implicit in the General Theory. Modigliani argued that the characteristics Keynesian conclusions are based primarily on the (realistic) rigidity of nominal wages. In particular, it showed that if wages and prices were flexible, the theory of liquidity preference of money could not generate persistent involuntary unemployment, but if wages were rigid, the theory of the amount of money could do it. Sixty years later Modigliani returned to expose the "Keynesian gospel" and proposed essentially the same interpretation. This article reconsiders and discusses this approach to macroeconomics, with some reference to its implications for economic policy.

Suggested Citation

  • Robert M. Solow, 2005. "Modigliani and Keynes," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 11-19.
  • Handle: RePEc:psl:bnlaqr:2005:23
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    Keywords

    Franco Modigliani; Keynesian gospel; wages;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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