Information, Finance, and Markets

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Abstract
Bankers and businessmen have long recognized the importance of finance, financial constraints, and financial institutions for the vitality and growth, both of their enterprises and of the economy. Yet, while these financial factors may have played a central role in economic theories of the nineteenth and eary twentieth centues [see for example Hawtrey (1919)] for almost a half century they have been subordianted to a secondary role by economic theorists. In seeking to explain business cycles, the most recent fashion among American academic economists—real business cycles—attributes no role at all to financial institutions; while in the earlier new classical theories (and even much of Keynesian theroy 2 ) all financial analysis is subsumed under the control of the money supply.

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