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EMMANUEL AGIS & GERMAN FELDMAN

This paper provides a critical review of alternative orthodox and heterodox theories about the role of monetary policy in the long period and develops the Classical-Sraffian approach to the subject. Our analysis supports the view that monetary conditions influence income distribution via the relationship between the long-term interest rate, which is exogenously fixed by the Central Bank, and the ‘normal’ profit rate. Moreover, we show that inflation emerges as a consequence of distributive conflicts between workers and capitalists for the surplus product. Finally, we briefly characterize some possible transmission channels of monetary policy to the real economy, which allow establishing potential ‘bridges’ between the price system and the dynamics of quantities.