Macroeconomics And Equilibrium

Date of Award


Degree Type


Degree Name

Doctor of Philosophy


This thesis consists of four essays, each of which is concerned with the relationship of General Equilibrium Theory to Macroeconomics. The first essay develops a classification scheme which arranges existing approaches to macroeconomics within a temporary equilibrium framework. It sorts these theories according to the way they handle expectations and the way they treat the determination of prices, and it concludes that those theories which attempt to combine a version of contract theory with rational expectations are the most promising.;The second essay develops a new foundation to the theory of implicit contracts which rests on the assumptions of asymmetric information and limited liability. It investigates the relationship between bankruptcy and layoffs, and demonstrates that layoff contracts which offer fixed nominal wages may be fully rational if information is asymmetric.;Essay three builds the bankruptcy contract of essay two into a temporary equilibrium framework with rational expectations, and it develops a new theory of aggregate supply which suggests that the frequency of bankruptcy and unemployment is a direct function of the real interest rate. This is combined with an intergenerational theory of money which suggests that the real interest rate is directly influenced by fiscal policy. The final essay assesses this contribution within the terms of reference of the survey of the literature contained in essay one.

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