TEMPORARY DISEQUILIBRIUM OF A PURE CASH ECONOMY
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Abstract
A Classical theoretical model of temporary disequilibrium in a pure cash monetary system is formulated, in which each capitalist aims to maximize accumulation in her/his own sector, and prices and allocations are determined by the Cantillon rule. The dynamics generated by this economy are those of a sequence of temporary disequilibria, which are shown to be locally and globally unstable. Thus, government intervention is justified to avoid an economic crisis. The paper concludes by recommending an extension of the model considering alternative monetary systems.
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References
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