Money, credit and business cycles in Marshall

Abstract

This paper reviews Alfred Marshall’s analysis of commercial cycles and the role of both speculation and credit in the different phases of this process. After a brief introduction to the subject, Marshall’s concepts of normal and banking interest rates, as well as his restatement of the Quantity Theory of Money, are discussed. Next, comes his explanation of the business cycles, where the theoretical elements seen in the previous sections are articulated in a single structure. Lastly, Marshall’s monetary theory is nd Knut Wicksell, highlighting the points of convergence, as well as the ones of disagreement, among these prominent neoclassical monetary theorists. A formal dynamic version of the Marshallian model of business cycles is presented in appendix.