Real economy causes of the Great Deprivation of early 21st Century

Naqvi, Nadeem (2008): Real economy causes of the Great Deprivation of early 21st Century.

Abstract

The American economy has undergone a dramatic structural change in the first decade of the 21st Century. The real-economy causes of this transformation, and their expression via the real estate market and its financial derivatives’ market, and their final manifestation in world financial markets, is explained using traditional economic theory. A three-sector Walrasian general equilibrium model, and a non-Walrasian temporary equilibrium model with fixed prices and quantity constraints, are both utilized to explain the real-economy causes of the observed stylized facts. Some remedies that will likely work, and ones that will not, are also identified. (95 words)

• Item Type: MPRA Paper
• Language: English
• Keywords: financial crisis, credit crunch, mortgage backed securities, fiscal policy, monetary policy, the U.S. economy, outsourcing, international capital mobility
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium; D - Microeconomics > D3 - Distribution; F - International Economics > F2 - International Factor Movements and International Business; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; F - International Economics > F1 - Trade; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles

References

Clower, R., (1967), “A Reconsideration of the Microfoundations of Monetary Theory,” Western Economic Journal, 6 (December), 1-9.

DeLorme, C.D. Jr., Naqvi, N. and Wemhöner, F., (1995), "Exchange Rate Variations and Capacity Utilization: A Specific Factors, Temporary Equilibrium Analysis," Jahrbücher für Nationalökonomie und Statistik, (March).

Dusansky, R. (1989), “The Demand for Money and Goods in the Theory of Consumer Choice with Money,” American Economic Review, 79(4), 895-902.

Feenstra, Robert C., (1986), “Functional Equivalence between Liquidity Costs and the Utility of Money,” Journal of Monetary Economics, 17(2), 271-291.

Naqvi, Nadeem, (2008), Theory of Economic Policy Evaluation and Distributive Justice, Mimeo.

Neary, J.P. (1980), “Nontraded Goods and the Balance of Trade in a Neo-Keynesian Temporary Equilibrium,” Quarterly Journal of Economics, 95(3), 403-29.

Samuelson, P.A. and Sato, R. (1984), “Unattainability of Integrability and Definiteness Conditions in the General Case of Demand for Money and Goods,” American Economic Review, 74(4), 588-604.

Sen, Amartya K., (1970), Collective Choice and Social Welfare, San Francisco: Holden ¬Day, 1970.

_____________, (1976), “Real National Income,” Review of Economic Studies, 43(1), 19-¬39.

_____________, (2000), “Consequential Evaluation and Practical Reason,” Journal of Philosophy, 97(9), 477-502.