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Equilibrium Model in a Monetary Economy

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  • Gancho Ganchev

Abstract

The paper consists of three parts. In the first part a monetary economy, based on credit money, is introduced. All financial instruments are considered as substitutes for money. In the second part the possibility of equilibrium convergence, under certain conditions, is studied. The conclusion is that that the equilibrium convergence requires monetary velocity acceleration. The velocity of money is introduced as complex variable derived as solution of a matrix equation and implying the existence of closed money circulation cycles. The third part is dedicated to interplay between the real and the financial sectors under the process of equilibrium convergence and economic stabilization. Keynesian, monetarist and real business cycle type of stabilization are studied. The conclusion about the possibility of destabilizing role of financial sector is drawn.

Suggested Citation

  • Gancho Ganchev, 2010. "Equilibrium Model in a Monetary Economy," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 97-115.
    • Handle: RePEc:bas:econth:y:2010:i:7:p:97-115
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    References listed on IDEAS

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    1. Yannis Panagopoulos & Aristotelis Spiliotis, 2008. "Alternative money theories: a G7 testing," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(4), pages 601-622, July.
    2. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
    3. Ellen R. McGrattan, 2006. "Real business cycles," Staff Report 370, Federal Reserve Bank of Minneapolis.
    4. Gillman M. & Siklos & P.L.Silver & J.L., 1996. "Money Velocity with Costly Credit," Department of Economics - Working Papers Series 515, The University of Melbourne.
    5. Broecker, Thorsten, 1990. "Credit-Worthiness Tests and Interbank Competition," Econometrica, Econometric Society, vol. 58(2), pages 429-452, March.
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    More about this item

    JEL classification:

    • E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other

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