This book addresses one of the major theoretical issues that underlies, implicitly or explicitly, some recurrent controversies in macroeconomics - namely, whether a competitive monetary economy has built-in mechanisms that are strong enough to remove excess demands and supplies on all markets, through an automatic adjustment of the price system. Jean-Michel Grandmont sheds light on this complex subject by using the analytical techniques of general equilibrium theory alongside the methods of monetary analysis. The book warns against the indiscriminate use of the rational expectations hypothesis when approaching this topic, and conversely stresses the common-sense observation that short-run learning processes are among the most important characteristics of economic agents. Grandmont argues that such processes are deserving of careful theoretical study, and the result is a clear and rigorous analysis of all the issues involved.

‘This is a beautifully written book. There is hardly a subject the author touches on that he does not enhance with the clarity and elegance of his exposition. Though it places much less emphasis on mathematical technique, the book stands comparison with the classic texts of Debreu (1959) and Hildenbrand (1974) … Grandmont’s pioneering work has allowed others to see more clearly what needs to be done and how to do it. For this he deserves the admiration and gratitude of all economists.’

Source: Journal of Political Economy

‘… those familiar with [Grandmont’s] work will expect a rigorous and mathematically sophisticated treatment of the issues and they will not be disappointed. In addition, he takes pains to explain in a heuristic fashion - and quite successfully - the significance of the mathematical proofs which are relegated to the appendices. For this effort Grandmont should be praised because he has opened up an area of the literature which by its nature was previously restricted to a very narrow audience.’

Source: Journal of Economic Literature

‘… this book is a very worthy venture, strongly recommended to monetary theorists of all persuasions. Moreover, the accessibility of exposition should make some of its important ideas available with benefit to undergraduate students in monetary economics.’

Source: The Economic Journal