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An Alternative Monetary Model of Inflation and Growth

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  • John Smithin
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    Abstract

    This paper presents a simple model of a monetary economy in which production takes time and is financed by loans from financial intermediaries such as banks. The model is an example of a pure credit economy, but does not contain the contentious Wicksellian construct of a natural rate of interest. Rather, the main determining factor of economic outcomes is the struggle over income distribution between finance (Keynes's rentiers), industry, and labour. The model yields a number of macroeconomic results, some of which are sharply at variance with those obtained in more orthodox or mainstream, models. In particular, a structural long-term Phillips-curve type relationship emerges in inflation-growth space, for some demand-side and monetary policy changes. In addition, the model is also able to identify other circumstances in which the opposite cases of either stagflation or non-inflationary growth can occur.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Review of Political Economy.

    Volume (Year): 9 (1997)
    Issue (Month): 4 ()
    Pages: 395-409

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    Handle: RePEc:taf:revpoe:v:9:y:1997:i:4:p:395-409

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    Cited by:
    1. Hein, Eckhard, 2010. "The rate of interest as a macroeconomic distribution parameter: Horizontalism and Post-Keynesian models of distribution of growth," IPE Working Papers 07/2010, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Alberto ZAZZARO, 2002. "How Heterodox is the Heterodoxy of the Monetary Circuit Theory? The Nature of Money and the Microeconomy of the Circuit," Working Papers 163, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    3. Hein, Eckhard, 2004. "Money, credit and the interest rate in Marx's economic. On the similarities of Marx's monetary analysis to Post-Keynesian economics," MPRA Paper 18608, University Library of Munich, Germany.
    4. John Smithin, 2002. "The Rate of Interest, Economic Growth, and Inflation: An Alternative Theoretical Perspective," Working Papers geewp23, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.

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