Pigou concluded that an equilibrium with employment below the full employment rate (the classical natural rate) could only occur if prices and wages were sticky.

Kalecki's criticism of the Pigou effect

The Pigou effect was criticized by Michal Kalecki because "The adjustment required would increase catastrophically the real value of debts, and would consequently lead to wholesale bankruptcy and a confidence crisis."

The Pigou effect and Japan

If the Pigou effect always

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