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Isabel Rodríguez Peña , Universidad Nacional Autónoma de México
Re-Interpretation of Wicksell’s Monetary Theory in an Intertemporal Equilibrium Model. Discussion of the Notion of a Monetary Equilibrium
After the financial crisis in 2008, the relevance of disequilibrium in theoretical models became central. This seems reasonable since the crisis came about in a time where the disequilibrium was not part of dominant theoretical approaches. In this context, the aim of this paper is to analyze the incorporation of Wicksell’s monetary equilibrium in a DSGE, in particular within the NNS approach developed by Woodford (2003). My analysis is concentrating on Woodford’s work, since there the importance of Wicksell’s monetary equilibrium is explicitly emphasized. However, the solution of Woodford’s model expressed in the Taylor rule rejects the core idea of Wicksell (1898). The Wicksell monetary equilibrium explains the interrelation between the real and the monetary sector about disequilibrium. On the contrary, Woodford relates the equilibrium with the steady state where the equilibrium itself is an assumption not a result. I will introduce some aspects of Wicksell’s original of monetary equilibrium.
Discussant: Hans-Michael Trautwein , Carl von Ossietzky Universität Oldenburg
Dirk Ehnts , Bard College Berlin
In the aftermath of the Great Financial Crisis (GFC) and with a focus on macroeconomic imbalances in the world economy economists have shown renewed interest in the way central banks and financial systems work. The rise of Modern Monetary Theory (MMT) has relied on the examination of balance sheets, which has led to advancements in the understandings of the nuts and bolts of the financial system and of the fundamental role of taxes, reserves and deposits. While the school is associated with Post-Keynesian economics, we make the case that it could just as well be called Post-Wicksellian. The aim is not to argue against or for some label, but to make explicit the Wicksellian connection. This can bring forward old discussions and insights and integrate them into the newer debates.
Discussant: Marc Lavoie , University of Ottawa
Full 2016 Program of the YSI Online Seminar in History of Economic Thought