Disequilibrium, Reproduction and Money: A Classical Approach
17 Pages Posted: 20 May 2014
Date Written: July 2014
We consider a bisector reproduction model in which money is introduced as a pure means of exchange issued by a bank at the producers' requests. Each capitalist aims at maximizing accumulation in his own sector. Their plans are based on available quantities and expected prices. Effective prices are determined by a market mechanism. Temporary disequilibria occur in both physical and monetary terms. The settlement of the monetary balances is operated by means of a transfer of capital goods. Final allocations and effective productions are thus determined. The dynamics of the economy are those of a sequence of temporary disequilibria and let appear several possibilities (local or global stability, cycles) depending on the values of the parameters.
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