ABSTRACT
This chapter synthesizes and generalizes some results of the previous chapters regarding wage…pricedynamics. We also refer here to some basic modeling approaches used in Chiarella and Flaschel (2000) and Chiarella et al. (2000). As in the previous chapters and as in Blanchard (1981) and Blanchard and Fischer (1989, Ch. 10.4), we here also reconsider real…“nancialinteraction. As in previous chapters, Blanchard•s treatment is modi“ed by relaxing his hypothesis of rational expectations and perfect substitutability of non-money “nancial assets. This chapter thus develops a model of real…“nancialinteraction that merges in a consistent way these two approaches from the literature. The subsequent analysis seeks to uncover its basic dynamic properties and feedback mechanisms.1
