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The aim of the present work is to study the effects of labour market flexibility on aggregate demand, productivity and employment within the theoretical framework of the Monetary Theory of Production. It is shown that labour market flexibility may not produce unidirectional effects on aggregate demand, productivity and employment, the working of the monetary market being decisive in establishing their levels.

Th e aim of this paper is to study the eff ect of emulation within a basic schema of the monetary theory of production (MTP). A theoretical model is presented, where workers set their target level of consumption based on the comparison with other workers taken as reference. It is shown that emulation can play a crucial role in increasing workers' propensity to indebtedness. As a result, profi ts increase and so does the price level, thus generating a decline of the real wage. Moreover, the existence of indebtedness can provide a further solution to the socalled »paradox of profi ts« within the MTP.

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