Hicks's ISLM model interpretation of Keynes's theory is subject to much controversy. In this paper, we focus upon the 'real balance' effect and its role in ISLM and AD/AS analyses. We shall argue that ISLM and AD/AS require 'nominal anchors'. We live in a world where, i... View more
8 B. McCallum, “The development of Keynesian macroeconomics”, American Economic Review, May 1987, 125 quoted in Boris D. Pesek, MICROECONOMICS OF MONEY AND BANKING AND OTHER ESSAYS (Hemel Hampstead: Harvester-Wheatsheaf, 1988).
9 Keynes thought the Pigou-Kalecki effect was "...too fantastic for words". See Robert Dimand, "Keynes, Kalecki, Ricardian equivalence, and the real balance effect", Bulletin of Economic Research, XLIII, July 1991, 289-292.
14 E. Baltensberger, Alternative approaches to the theory of the banking firm, Journal of Monetary Economics, VI, January 1980, 1-37.
15 Bank of Canada, The Implementation of Monetary Policy in a System with Zero Reserve Requirements, Discussion Paper #3, revised September 1991. This '2 for 1' rule is now changed. See Bank of Canada, "A proposed framework for the implementation of monetary policy in the large value transfer system environment," Discussion Paper #2, 1 March 1996 and Kevin Clinton, "Implementation of monetary policy in a regime with zero reserve requirements", Bank of Canada Working Paper 97-8, April 1997.