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Classical and Keynesian Unemployment in the IS-LM Model

In: Monetary Theory and Economic Institutions

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  • Jean-Michel Grandmont

    (CEPREMAP)

Abstract

The recent literature on equilibrium with quantity rationing has cast a new light on the origins and the cures of unemployment. By reconsidering the traditional Keynesian elementary multiplier model, this approach has in particular brought to the forefront of the analysis the important distinction between Keynesian unemployment, which results from a lack of demand, and classical unemployment, which comes from too high a real wage. (The first attempts to model these different sorts of unemployment are due to Solow and Stiglitz, 1968; Barro and Grossman, 1971, 1976; Younès, 1970, 1975; Benassy, 1973, 1975, 1977, 1982a. The term classical unemployment has been coined by Malinvaud, 1977, in his thorough study of a similar model.)

Suggested Citation

  • Jean-Michel Grandmont, 1987. "Classical and Keynesian Unemployment in the IS-LM Model," International Economic Association Series, in: Marcello Cecco & Jean-Paul Fitoussi (ed.), Monetary Theory and Economic Institutions, chapter 4, pages 66-94, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-08781-5_4
    DOI: 10.1007/978-1-349-08781-5_4
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