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Intertwined real and monetary stochastic business cycles

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  • Kakarot-Handtke, Egmont

Abstract

There is no such thing as a real economy. The task, therefore, is to consistently reconstruct the fluctuations of employment and output from the interactions of real and nominal variables. The present paper does exactly this. No nonempirical concepts like utility, equilibrium, rationality, decreasing returns or perfect competition are applied. The analysis runs rigorously in objective structural axiomatic terms. Therefrom follows that it is the factor cost ratio, i.e. the relation of the nominal variables wage rate and price and the real variable productivity that, for any given level of effective demand, drives the fluctuations of employment and output.

Suggested Citation

  • Kakarot-Handtke, Egmont, 2012. "Intertwined real and monetary stochastic business cycles," MPRA Paper 42793, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42793
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    File URL: https://mpra.ub.uni-muenchen.de/42793/1/MPRA_paper_42793.pdf
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    References listed on IDEAS

    as
    1. Frank Ackerman, 2001. "Still dead after all these years: interpreting the failure of general equilibrium theory," Journal of Economic Methodology, Taylor & Francis Journals, vol. 9(2), pages 119-139.
    2. Robert G. King & Charles I. Plosser, 1982. "The Behavior of Money, Credit, and Prices in a Real Business Cycle," NBER Working Papers 0853, National Bureau of Economic Research, Inc.
    3. Kakarot-Handtke, Egmont, 2012. "General formal foundations of the virtuous deficit–profit symmetry and the vicious debt deflation," MPRA Paper 42912, University Library of Munich, Germany.
    4. Kyun,Kim, 1988. "Equilibrium Business Cycle Theory in Historical Perspective," Cambridge Books, Cambridge University Press, number 9780521350785, August.
    5. Kakarot-Handtke, Egmont, 2011. "When Ricardo saw profit, he called it rent: on the vice of parochial realism," MPRA Paper 33625, University Library of Munich, Germany.
    6. Wynne Godley & Anwar Shaikh, 2002. "An Important Inconsistency at the Heart of the Standard Macroeconomic Model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 24(3), pages 423-441, March.
    7. Tomasson, Gunnar & Bezemer, Dirk J, 2010. "What is the Source of Profit and Interest? A Classical Conundrum Reconsidered," MPRA Paper 20320, University Library of Munich, Germany.
    8. Buiter, Willem H, 1980. "Walras' Law and All That: Budget Constraints and Balance Sheet Constraints in Period Models and Continuous Time Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 1-16, February.
    9. Edward N. Gamber & Frederick L. Joutz, 1997. "Real Wages over the Business Cycle," Eastern Economic Journal, Eastern Economic Association, vol. 23(3), pages 277-291, Summer.
    10. Kakarot-Handtke, Egmont, 2011. "Schumpeter and the essence of profit," MPRA Paper 31176, University Library of Munich, Germany.
    11. Keuzenkamp, H.A. & McAleer, M., 1994. "Simplicity, scientific inference and econometric modelling," Discussion Paper 1994-56, Tilburg University, Center for Economic Research.
    12. Weintraub, E Roy, 1970. "Stochastic Stability of a General Equilibrium Model," American Economic Review, American Economic Association, vol. 60(2), pages 380-384, May.
    13. King, Robert G & Plosser, Charles I, 1984. "Money, Credit, and Prices in a Real Business Cycle," American Economic Review, American Economic Association, vol. 74(3), pages 363-380, June.
    14. Hoover, Kevin D, 1984. "Two Types of Monetarism," Journal of Economic Literature, American Economic Association, vol. 22(1), pages 58-76, March.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. There is no such thing as a real economy
      by Economic Logician in Economic Logic on 2012-12-28 21:07:00

    More about this item

    Keywords

    new framework of concepts; structure-centric; axiom set; profit; distributed profit; Say’s regime; supersymmetric price; Slutzky-cycle; transaction money; general multiplier;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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