The objective of this article is to present an extension of Garrison’s “capital-based macroeconomics” model. Garrison’s objective was—starting from a full employment equilibrium situation—to build a model that provides insight into the causes of crisis and depression. We offer—starting from an unemployment situation—an explanation of why expansionary monetary policies fail in the longer term to solve the unemployment problems associated with recessions. This extension provides a fresh perspective on the debates between Hayek and Keynes in the 1930s and over “quantitative easing” today.
Available at: http://works.bepress.com/adrian_ravier/3/