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Article Dans Une Revue Review of Economic Studies Année : 2014

When Demand Creates its Own Supply: Saving Traps

Résumé

The mechanism by which aggregate supply creates the income that generates its matching demand (called Say’s Law), may not work in a general equilibrium with decentralized markets and savings in bonds or money. Full employment is an equilibrium, but convergence to that state is slow. A self-fulfilling precautionary motive to accumulate bonds (with a zero aggregate supply) can set the economy on an equilibrium path with a fast convergence towards a steady state with unemployment that may be an absorbing state from which no equilibrium path emerges to restore full employment.

Dates et versions

halshs-01109084 , version 1 (24-01-2015)

Identifiants

Citer

Christophe Chamley. When Demand Creates its Own Supply: Saving Traps. Review of Economic Studies, 2014, 81 (2), pp.651-680. ⟨10.1093/restud/rdt041⟩. ⟨halshs-01109084⟩
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