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Macroeconomic Theory$
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Jean-Pascal Benassy

Print publication date: 2011

Print ISBN-13: 9780195387711

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780195387711.001.0001

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Money and Cycles

Money and Cycles

(p.270) 12 Money and Cycles
Macroeconomic Theory

Jean-Pascal Bénassy

Oxford University Press

This chapter extends the discussion on realistic economies with monetary exchange and assumptions of price flexibility mentioned in Chapter 10 by incorporating the three important features, namely monetary shocks, imperfect competition, and imperfect information. It deals with the relation of the application of simple real models to these shocks while taking into account Walrasian equilibrium theory. The chapter argues that preserving the monetary structure, the theory may become inapplicable. It also explains that imperfect information present in Lucas’ model can lead to misunderstanding of these shocks. This chapter also includes sample problems regarding money and imperfect competition on goods and labor markets and Lucas’ signal extraction model.

Keywords:   economic rigidities, monetary shocks, Walrasian equilibrium theory, Lucas’ model, models of fluctuations, imperfect competition, imperfect information

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