Beyond Keynes and the classics outline of the goods side/money side model of the business cycle and macroeconomic configurations

Abstract

This paper presents the goods side/money side (GS/MS) model as a novel way of macroeconomic analysis. The GS/MS model goes beyond Keynesianism as it makes a sharp distinction between the goods side and the money side and thus avoids the indistinctness between real nominal values that come with spending in aggregate demand models. The GS/MS model transcends classical macroeconomics in its traditional and modern versions as it reinstates money as an active factor in the economy. Different from monetarism, the key monetary concept of the GS/MS model is “macroeconomic liquidity”, which includes velocity of circulation. The present paper presents the basic features of the GS/MS model and shows its use by analyzing macroeconomic configurations, the business cycle, and economic growth. The paper includes an appendix with an evaluation of macroeconomic configurations in the light of the GS/MS model.