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Uncertainty, Expectations, and Financial InstabilityReviving Allais's Lost Theory of Psychological Time$
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Eric Barthalon

Print publication date: 2014

Print ISBN-13: 9780231166287

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231166287.001.0001

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Macrofoundations of Monetary Dynamics

Macrofoundations of Monetary Dynamics

(p.47) Chapter Three Macrofoundations of Monetary Dynamics
Uncertainty, Expectations, and Financial Instability

Eric Barthalon

Columbia University Press

This chapter examines the macrofoundations of Maurice Allais's theory of monetary dynamics. In particular, it considers Allais's theoretical contributions with respect to the establishment—through the aggregation of the cash flow statements of individual businesses—of the accounting identities linking nominal macroeconomic variables, including transactions on securities, bank credit, and money. It also discusses Allais's role in the endogenous generation of cyclical fluctuations in aggregate nominal spending by a stylized model in which the driving factor is the gap between the supply of and the demand for money, both of which are nonlinear, bounded, but analytically not specified functions: the former increases and the latter decreases in relation to nominal growth.

Keywords:   monetary dynamics, Maurice Allais, cash flow, accounting identities, macroeconomic variables, securities, bank credit, money, cyclical fluctuations, nominal spending

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