This paper takes a discrete-time adaptation of the continuous-time matching economy described in Pissarides (1990, 2000), and computes the solution to the dynamic planning problem. The solution is shown to be completely characterized by a first-order, non-linear map. We show that the map admits a unique stationary solution which is dynamically unstable. Oscillatory solutions are possible but there is no possibility of periodic solutions. The planner picks the initial condition that places the economy directly on the steady state. Our results are in sharp contrast to received wisdom on out-of-steady-state dynamics in the continuous-time decentralized version of the Pissarides model where adjustment to the steady state is non-instantaneous, and overshooting of vacancies is possible.
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Article provided by Economics Bulletin in its journal Economics Bulletin.
Find related papers by JEL classification: E0 - Macroeconomics and Monetary Economics - - General J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Dale T. Mortensen, 1991.
"Equilibrium Unemployment Cycles,"
Discussion Papers
939, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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