In the tradition of classical economics, Pigou preferred the idea of "natural rates," to which an economy would ordinarily return, although he acknowledged that sticky prices might still prevent reversion to natural output levels after a demand shock. Pigou saw the real balance effect as a mechan...
Also known as the “Real Balance Effect,” the Pigou Effect essentially proposes that any increase or decrease in aggregate demand will be self-correcting. The main argument Pigou emphasizes is the lack of any link between real balances and current consumption in theGeneral Theory of Keynes. His...
ECONOMICSFINANCEThe 'Pigou effect' has drawn the attention of monetary theorists for three decades. We argue in this paper that the nature and significance of Pigou's (1943, 1947) comments on Keynes have been frequently misinterpreted. In particular, we suggest that Pigou's logic implies not ...
Pigou’s claim that “there will be certain rates of tax [that] would increase […] economic welfare; and one rate of tax, which would have the optimum effect in this respect” also holds in
Mundell–Tobin effect is recovered in an OLG model and Cash-in-Advance constraint. Inflation increases capital in an OLG model with a Cash-in-Advance constraint.doi:10.1016/j.econlet.2012.05.028Arman MansoorianDepartment of EconomicsElsevier B.V....