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Asymmetrical Monetary Relations and Involuntary Unemployment in a General Equilibrium Model

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  • Piluso Nicolas

    (Habilitation to Supervise Research, Toulouse Paul Sabatier University (France), CERTOP CNRS, 115E Rte de Narbonne, 31000 Toulouse, France)

Abstract

This article aims to model Keynesian involuntary unemployment within the framework of Walrasian general equilibrium, incorporating an additional hypothesis: the possibility of credit restrictions by banks or financial intermediaries. Keynes’s theory of involuntary unemployment is based on the rejection of the “second classical postulate,” which leads to the idea that entrepreneurs alone decide the level of employment. This is what some Keynesians call the asymmetry of the wage relationship. The result is a restriction of Walras’ law, which no longer includes the labor market. However, the problem is that entrepreneurs themselves may find themselves constrained by financial intermediaries. If there is a second type of asymmetry, i.e., between banks/financial intermediaries and entrepreneurs, Walras’ law will be doubly restricted since it will also exclude the credit market. I set out to identify the consequences of the properties of involuntary unemployment in a general equilibrium model.

Suggested Citation

  • Piluso Nicolas, 2024. "Asymmetrical Monetary Relations and Involuntary Unemployment in a General Equilibrium Model," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-10.
    • Handle: RePEc:bpj:econoa:v:18:y:2024:i:1:p:10:n:1001
    DOI: 10.1515/econ-2022-0125
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    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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