Money, Imperfect Information and Economic Fluctuations
AbstractThis paper summarizes the macro-economic and, in particular, monetary and financial market implications of recent developments in the micro-economic theory of imperfect information. These micro-economic models which lead to credit-rationing on the one hand and limitations in the availability of equity type financing on the other can account for a wide range of observed business cycle and monetary phenomena. These include (a) unemployment, (b) the existence of Keynesian-type multiples, (c) the observed lack of production smoothing in response to cyclical fluctuations in demand, (d) the impact of monetary policy on business activity despite the absence of significant changes in real interest rates, and (e) price rigidities which arise from rational firm decisions (not as an a priori assumption).
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2188.
Date of creation: Mar 1987
Date of revision:
Publication status: published as Kohn, Meir and Sho-Chieh Tsiang (eds.) Finance constraints, expectations, and macroeconomics. Oxford; New York; Toronto and Melbourne: Oxford University Press, Clarendon Press, 1988.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-03-04 (All new papers)
- NEP-MFD-2002-03-04 (Microfinance)
- NEP-PKE-2002-03-04 (Post Keynesian Economics)
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