Publisher's Synopsis
This study examines a new area of macroeconomic theory: the implications of the finance constraint approach to monetary theory.;Hicks, Tsiang, Diamond, Howitt, Stockman, Kohn, Greenwald and Stiglitz, Helpman and Drazen, Svensson, Aoki and Liejonhufvud, and Woodford contribute papers which seek to understand monetary and macroeconomic issues in terms of financial market "imperfections".;The incompleteness of financial markets and the existence of finance constraints provide an explanation for the sort of co-ordination problem that afflicts real-world economies, but is absent from simplistic New Classical models.;In the presence of financial constraints, economies exhibit deviation-amplifying multipliers, non-pecuniary externalities and multiple self-fulfilling expectations equilibria.;Even with rational expectations, optimizing behaviour and flexible prices, these papers argue that there may remain room for benign policy intervention of a Keynesian nature.
