Abstract:This paper examines loanable fund models with a stabilized interest rate, in which the banking system bridges the gap between the flow of demand and the provision of funds. A typical Mickselian model is developed to emphasize the importance of credit and inflation (deflation) in closing the gap between savings and investment. Substituting the nominal interest rate for the real - an appropriate modification in a model whose inflation is relevant - and using the Robertsonian definition of income, we realize that… Show more
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