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Money Creation, Employment and Economic Stability: The Monetary Theory of Unemployment and Inflation

Author

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  • Alain Parguez

    () (University of Besano006e, France)

Abstract

This paper by building on the general theory of the monetary circuit, proves that money-as a pure bank credit liability-exists to overcome constraints on required expenditures by firms, household and mainly the State. From this perspective the paper derives the employment function in the modern monetary economy. Thereby it is explained that full employment policy is both always possible and required. It is proven that this conclusion holds in a perfectly open economy. Ultimately it is explained that there is no trade-off between full employment and sustainable price stability.

Suggested Citation

  • Alain Parguez, 2008. "Money Creation, Employment and Economic Stability: The Monetary Theory of Unemployment and Inflation," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(1), pages 39-67, March.
  • Handle: RePEc:voj:journl:v:55:y:2008:i:1:p:39-67
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    Cited by:

    1. repec:eee:streco:v:41:y:2017:i:c:p:79-85 is not listed on IDEAS
    2. Massimo Cingolani & Nadia Garbellini & Ariel Wirkiermann, 2012. "Macroeconomic Developments and Medium-term Outlook for the Western Balkans and Croatia," Book Chapters, Institute of Economic Sciences.
    3. repec:bla:metroe:v:68:y:2017:i:2:p:378-395 is not listed on IDEAS
    4. Guglielmo Forges Davanzati, 2015. "Nicholas Kaldor on endogenous money and increasing returns," Working Papers PKWP1505, Post Keynesian Economics Study Group (PKSG).

    More about this item

    Keywords

    Money; Banks; Employment; Fiscal policy; Phillips curve; Inflation; Exchange rates; Deficit; Consumption; Investment;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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