Money, Imperfect Information and Economic Fluctuations
This 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).
|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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- Bruce C. Greenwald & Joseph E. Stiglitz & Andrew Weiss, 1984.
"Informational Imperfections in the Capital Market and Macro-Economic Fluctuations,"
NBER Working Papers
1335, National Bureau of Economic Research, Inc.
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"Money, Credit Constraints, and Economic Activity,"
NBER Working Papers
1084, National Bureau of Economic Research, Inc.
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- Joseph E. Stiglitz, 1983. "On the Relevance or Irrelevance of Public Financial Policy," NBER Working Papers 1057, National Bureau of Economic Research, Inc.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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