"Income Distribution in a Monetary Economy: A Ricardo-Keynes Synthesis"

The paper provides a novel theory of income distribution and achieves an integration of monetary and value theories along Ricardian lines, extended to a monetary production economy as understood by Keynes. In a monetary economy, capital is a fund that must be maintained. This idea is captured in the circuit of capital as first defined by Marx. We introduce the circuit of fixed capital; this circuit is closed when the present value of prospective returns from employing it is equal to its supply price. In a steady-growth equilibrium with nominal wages and interest rates given, the equation that closes the circuit of fixed capital can be solved for prices, implying a definitive income distribution. Accordingly, the imputation for fixed capital costs is equivalent to that of a money contract of equal length, which is the payment per period that will repay the cost of the fixed asset, together with interest. It follows that if capital assets remain in use for a period longer than is required to amortize them, their earnings beyond that period have an element of pure rent.Income Distribution; Circuits of Capital; Monetary Economy

Income distribution in a monetary economy

In a monetary economy capital is a fund. This idea is captured by the circuit of capital. We define a circuit for fixed capital and argue that it is closed when the fund that initiates it is recovered in a present value sense. The circuit of newly invested fixed capital must be equivalent to the comparable direct circuit of money. This is the condition for monetary equilibrium in the sense of Keynes. From this equivalence it is possible to determine what the imputation for fixed capital must be, implying a definitive income distribution. The solution implies that capital assets that last longerthan the period of the circuit earn pure rent

Turkish Currency Crisis of 2000-2001, Revisited

Turkey's exchange rate based stabilization programme had collapsed within just 11 months of its implementation in the midst of a liquidity crunch in November 2000 caused by a reversal in the capital inflow. The onset of the stabilization programme created ample opportunities for speculative investors to make relatively safe one-sided bets, and the initial success of the programme in bringing down interest rates implied substantial capital gains over securities obtained in 1999 and early stages of the programme. It was only natural that speculative investors would take the opportunity to realize these gains while the firm exchange rate commitment was still in place. The programme failed to deal with this contingency effectively, assuming that as long as it was implemented faithfully, long-term investors would be forthcoming to takeover positions speculators would want to unload. That assumption proved disastrously wrong.Currency crises, financial liberalization, capital flow reversals, Turkey, asset price speculation,