ABSTRACT
This chapter focuses on the financial market in a perspective we have not dealt with. The chapter builds on work of Asada et al. by using the modeling framework of those papers to design a macrodynamic framework for labor market and monetary policies that allows in general for large swings in financial and real economic activity. It is based upon the Tobin framework as embellished by Franke and Semmler. The chapter builds on models of the dynamic interaction of the labor market, the product market and the financial market with risky assets. By doing so, we revive the framework of a macroeconomic portfolio approach that Tobin had suggested, but also build on recent work on the interaction of heterogeneous agents in the financial market. It is organized in such a way that it motivates long-term bonds and incorporates them formally into the model structure.
