Monetary politics in quasi-linear macroeconomic model
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Date
2019
Authors
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Journal ISSN
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Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
In this article we introduce an original model of macroeconomic equilibrium that consists of 7 interconnected equations. The five equations out of the seven, describe equilibrium of aggregate markets of intermediate goods, final goods, labour, capital and money. The remaining two equations depict the process of formation of equilibrium price level. In the paper it is shown that if an interest rate is not accounted for as an explanatory
variable in a demand function for final goods, then money is absolutely neutral in economy. When interest rate is accounted for, then growth of money supply contributes to the growth of the values of nominal as well as real variables.
Description
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Keywords
intermediate goods; final goods; price level; nominal wage; endogenous variables
Citation
The 4th International Scientific Conference: "Challenges of Globalization in Economics and Business", Tbilisi, 2019, pp. 20-26