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An Alternative Monetary Model of Inflation and Growth

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  • John Smithin

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.

Suggested Citation

  • John Smithin, 1997. "An Alternative Monetary Model of Inflation and Growth," Review of Political Economy, Taylor & Francis Journals, vol. 9(4), pages 395-409.
    • Handle: RePEc:taf:revpoe:v:9:y:1997:i:4:p:395-409
    DOI: 10.1080/09538259700000039
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    References listed on IDEAS

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    1. John Smithin, 1996. "Macroeconomic Policy and the Future of Capitalism," Books, Edward Elgar Publishing, number 764.
    2. David Laidler, 1993. "Was Wicksell a Quantity Theorist?," Palgrave Macmillan Books, in: Haim Barkai & Stanley Fischer & Nissan Liviatan (ed.), Monetary Theory and Thought, chapter 8, pages 146-181, Palgrave Macmillan.
    3. John Smithin, 1990. "Macroeconomics After Thatcher and Reagan," Books, Edward Elgar Publishing, number 413.
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    Cited by:

    1. John Smithin, 2002. "The Rate of Interest, Economic Growth, and Inflation: An Alternative Theoretical Perspective," Working Papers geewp23, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    2. Eckhard Hein, 2005. "Finanzstruktur und Wirtschaftswachstum - theoretische und empirische Aspekte," IMK Studies 01-2005, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Hein, Eckhard, 2010. "The rate of interest as a macroeconomic distribution parameter: Horizontalism and Post-Keynesian models of distribution of growth," MPRA Paper 23372, University Library of Munich, Germany.
    4. 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.
    5. 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.
    6. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.

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