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The Chemistry of the Macroeconomy

Author

Listed:
  • Robert Gmeiner

    (Methodist University
    The Sunwater Institute)

Abstract

Asset booms and busts have accompanied or caused recent macroeconomic fluctuations. However, asset prices are not a part of GDP nor are they included in inflation calculations. Links between the financial sector and real economy are increasingly important. This paper borrows an approach from the natural sciences to explain the optimal amount of transactions for unbacked assets. Excessive transactions for such assets impede long run growth. This theory does not involve asset prices, only transactions, offering a distinction from literature on asset bubbles, and leads to concise policy recommendations to improve macroeconomic stability.

Suggested Citation

  • Robert Gmeiner, 2022. "The Chemistry of the Macroeconomy," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 18(3), pages 289-313, November.
    • Handle: RePEc:spr:jbuscr:v:18:y:2022:i:3:d:10.1007_s41549-022-00076-8
    DOI: 10.1007/s41549-022-00076-8
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    More about this item

    Keywords

    Unbacked assets; Money velocity; Monetary policy; Financial stability;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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