Macroeconomic theory: a textbook on macroeconomic knowledge and analysis

746 Pages·2000·4.13 MB·English

by  Unknown Author

MACROECONOMICTHEORY
ATextbookonMacroeconomicKnowledgeandAnalysis
VOLUMEC:INFLATION,EMPLOYMENTANDBUSINESSFLUCTUATIONS
ADVANCED TEXTBOOKS
IN ECONOMICS
VOLUME35
Editors:
C.J.BLISS
M.D.INTRILIGATOR
AdvisoryEditors:
W.A.BROCK
D.W.JORGENSON
A.P.KIRMAN
J.-J.LAFFONT
L.PHLIPS
J.-F.RICHARD
ELSEVIER
Amsterdam–London–NewYork–Oxford–Paris–Shannon–Tokyo
MACROECONOMIC THEORY
A Textbook on Macroeconomic Knowledge and Analysis
EdmondMALINVAUD
Volume C: INFLATION, EMPLOYMENT AND
BUSINESS FLUCTUATIONS
AdaptationandrevisionofThéorieMacroéconomique,publishedin1981–1982byDunod,Paris,and
translatedintoEnglishbyFenellaKirman.
2000
ELSEVIER
Amsterdam–London–NewYork–Oxford–Paris–Shannon–Tokyo
ELSEVIERSCIENCEB.V.
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INTRODUCTIONTO THE SERIES
Theaimoftheseriesistocovertopicsineconomics,mathematicaleconomics
and econometrics, at a level suitable for graduate students or final year un-
dergraduates specializing in economics. There is at any time much material
thathasbecomewellestablishedinjournalpapersanddiscussionserieswhich
stillawaitsaclear,self-containedtreatmentthatcaneasilybemasteredbystu-
dents without considerable preparation or extra reading. Leading specialists
willbeinvitedtocontributevolumestofillsuchgaps.Primaryemphasiswill
be placed on clarity, comprehensivecoverage of sensibly defined areas, and
insightintofundamentals,butoriginalideaswillbenotbeexcluded.Certain
volumeswillthereforeaddtoexistingknowledge,whileotherswillserveasa
meansofcommunicatingbothknownandnewideasinawaythatwillinspire
andattractstudentsnotalreadyfamiliarwiththesubjectmatterconcerned.
TheEditors
v
This Page Intentionally Left Blank
Preface
Thistextbookmay appearuncommonbecause of its length and its organiza-
tion, because of its eclectic blend of approaches, empirical claims and mod-
elling developments,finally because of its frequentreference to old material
andindeedbecauseoftheageofitsauthor.Readerswilljudgefromtheresults.
Hereare,however,afewindicationswhichmayexplainpartofthesingularity
andsuggesthowtobestusethebook.
Itistheoutcomeofthelastfortyyearsduringwhichtheauthorworkedon
macroeconomics,teaching it, building tools for its study, particularly within
thepublicservice,oradvisingonpolicies.Thisactivitytookplaceinvarious
environments;italwaysledtoreflectonthecontentofmacroeconomicknowl-
edge, as well as on research methods for improving or applying knowledge;
it called for continually reading the literature, often marvelling at new ideas
orresearchinnovations,sometimesalsoannoyedatmisplacedclaimsorrisky
fashions,alwayswonderinghowrecentresultswereprogressivelyenrichingor
alteringearlieraccumulatedknowledge.
Such a long maturationinevitably entails a perspective in which contribu-
tionsmadeinthe1950sand1960sfindtheirplacebesidemoremodernones,
even when the latter may claim to encompass some of the former. But the
book is not about the various macroeconomicschools, nor about the history
of macroeconomicideas. It rather aims at offeringan organizedtreatmentof
presentknowledge,occasionallyexposingthecontributionsoffamousauthors
orfamousworks,butonlywhenthatseemedtobeunavoidable.
If the balance between the places respectively given to various topics or
approachesdiffersfromthatfoundinotherbooks,itmayalsobebecauseofa
differentperceptionbythe authoronwhatwereally know,onhowwecould
knowmore,onwhatwouldbecrucialforafullerandmorerelevantknowledge.
So are involved ideas about the purpose of knowledge and ideas about the
methodsthatmaymakeitmorereliable.
vii
viii PREFACE
Thisbookmayappearlongonpreliminaries.Indeed,questionsconcerning
economic growth and business fluctuations will not be really tackled before
Chapter5,thatisafteragoodthirdofthewholetext.Thereasonwillbepre-
sentedinthe introduction.Inanycasesuch a longbookis boundto beoften
usedlikeanencyclopedia.Thestudentwhowoulddecidetobeginreadingat
Chapter5wouldnotbelost,ifheorshealreadyhadagoodbackground.The
studentor teacherwhowouldhave onceunderstoodhowargumentsandevi-
dencesweredevelopingthroughoutthefullbookcouldusefullyreferbackto
particularsectionsforcloserexamination.
Thebookisaddressedmainlytostudentswhoarealreadyacquaintedwith
economicsanditsmethods.Noprerequisiteisabsolutelyrequired;butthetext
is too dense for being directly accessible to those who would be ignorantof
economicconcepts, of economic phenomenaor of the economicsdiscipline.
Theauthorhopesthatthebookwillbeusedinthefirstyearsofpost-graduate
teaching and that it will serve to all kinds of economists as a reference on
particularmacroeconomicissues orapproacheswith whichthoseeconomists
maynotbefamiliar.Noonewillbesurprisedifheorshefindsinthebooka
slightbiasinfavourofquestionsormodelsatwhichtheauthorworked.
Thebookisorganizedinninelongchapters,dividedintopartsandfurther
intosections.Itismadeofthreevolumes.VolumeA(Chapters1–4)presents
the conceptual framework of macroeconomic theory and an extensive treat-
mentofthebehaviourofthetwomainkindsofagents,consumersandproduc-
ers,seenfromthemacroeconomicviewpoint.VolumeB(Chapters5–7)deals
witheconomicgrowthandwiththestaticanalysisofshort-runchangesinem-
ploymentandothermacroeconomicvariables.VolumeC(Chapters8and9)is
devotedtothedynamicsofinflation,tobusinessfluctuationsandtomacroeco-
nomicpolicies.
CONTENTSOFVOLUMESA,BANDC
VOLUMEA:FRAMEWORK,HOUSEHOLDSANDFIRMS
Introductiontotheseries v
Preface vii
Introduction xvii
Chapter1 THE GENERALFRAMEWORK
Part1 Agents,Assets,Operations 2
1.1 Divisionintoperiods 3
1.2 Assets 4
1.3 Operations 6
1.4 Changesinassetsandoperations 9
1.5 Agents 13
1.6 Overallconsistency 15
Part2 Prices,InterestandProfits 19
2.1 Pricesandwagerates 20
2.2 Marketpricesandexpectedprices 23
2.3 Profits 24
2.4 Arbitrageandequilibrium 27
2.5 Interestratesandbondprices 28
2.6 Termstructureandexpectedinterestrates 31
2.7 Ratesofyieldonnegotiableshares 34
2.8 Profitratesandinterestrates 35
Part3 EquilibriumandBehaviouralLaws 39
3.1 Variablesandaccountingequations 39
3.2 Exogenousandendogenousvariables—behaviourlaws 42
3.3 Theconceptofequilibrium 44
3.4 Exanteandexpostconcepts 45
3.5 Consistencyofexantedecisions 47
ix