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Asymmetrical Monetary Relations and Involuntary Unemployment in a General Equilibrium Model

Author

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  • Nicolas Piluso

    (CERTOP - Centre d'Etude et de Recherche Travail Organisation Pouvoir - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse - CNRS - Centre National de la Recherche Scientifique, UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse, UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse)

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

  • Nicolas Piluso, 2024. "Asymmetrical Monetary Relations and Involuntary Unemployment in a General Equilibrium Model," Post-Print hal-04741833, HAL.
    • Handle: RePEc:hal:journl:hal-04741833
    DOI: 10.1515/econ-2022-0125
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