The Keynesian Model with Money

Abstract

Following a reappraisal by Clower (1965, 1967) and Leijonhufvud (1968) of attempts to analyze unemployment phenomena in the Keynesian spirit in monetary environments Barro & Grossman (1971), Benassy (1975b), Drèze (1975), Younès (1975), Malinvaud (1977), and others presented pioneering work integrating disequilibrium trading principles into the Hicksian monetary intertemporal framework. This induced a reconsideration of the Keynesian criticism of equilibrium theory as being an inadequate tool to describe unemployment situations in aggregative economies. Within two decades a considerable number of publications presented extensions and justifications for this approach attempting to provide microeconomic foundations to Keynesian macroeconomics with unemployment configurations. The surge of publications with the joint perspective of microeconomic foundations to potential macroeconomic applications was designed to describe a modeling framework to characterize stationary disequilibrium configurations with typical permanent price and wage rigidities.