A Neo-Keynesian Theory of Inflation and Economic Growth

lhe PUIllooes of this study are to investigate processes of cyclical fluctuations, inflation and economic g: tOolth, and conComitantly, to relate the short-run analysis to the long-run analysis of the econaTY as far as feasible under the confines of this investigation. First of all, we shall present a theory of investnent in Chapter 1. We shall make evident defects included in the neo-classical theory of investnent, founded in particular by I. Fisher and a variant of which is the Keynesian version, by taking into account recent studies of investnent and by formulating a new theory of investnent. Its incorporatim into our dynamic analyses is one of the reasons why the theory developed in this study is referred to as Neo- Keynesian. Brlefly, the theory is characterlzed by firm investnent being a function of the firms expected stock of money, the expected marginal productivi- ty of capital, and the expected rate of inflation (or the firms subjective rate of real interest) .