Monetary equilibrium and price stickiness: Causes, consequences and remedies

Monetary equilibrium and price stickiness: Causes, consequences and remedies We assess monetary equilibrium theory by focusing on its foundation—price stickiness—and answer several ancillary questions. Prices are sticky at times. Contra monetary equilibrium theorists, this is not a reason to advocate an issuance of fiduciary media to counteract the effects of a sluggish price adjustment process. Issuances of fiduciary media will breed negative effects, primarily via wealth redistributions, faulty interest rate signals and exacerbated business cycles. Allowing the price level to adjust to maintain monetary equilibrium provides for fewer detrimental effects than adjusting the supply of credit. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Austrian Economics Springer Journals

Monetary equilibrium and price stickiness: Causes, consequences and remedies

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Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Economics; Public Finance; Political Science; History of Economic Thought/Methodology
ISSN
0889-3047
eISSN
1573-7128
D.O.I.
10.1007/s11138-011-0151-7
Publisher site
See Article on Publisher Site

Abstract

We assess monetary equilibrium theory by focusing on its foundation—price stickiness—and answer several ancillary questions. Prices are sticky at times. Contra monetary equilibrium theorists, this is not a reason to advocate an issuance of fiduciary media to counteract the effects of a sluggish price adjustment process. Issuances of fiduciary media will breed negative effects, primarily via wealth redistributions, faulty interest rate signals and exacerbated business cycles. Allowing the price level to adjust to maintain monetary equilibrium provides for fewer detrimental effects than adjusting the supply of credit.

Journal

The Review of Austrian EconomicsSpringer Journals

Published: Apr 28, 2011

References

  • Deflation and depression: is there an empirical link?
    Atkeson, A; Kehoe, PJ
  • Monetary policy as bad medicine: the volatile relationship between business cycles and asset prices
    Bagus, P

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