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Imperfectly Competitive Cycles with Keynesian and Walrasian Features

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  • Kaas, Leo

    (Department of Economics, University of Vienna)

  • Madden, Paul

    (School of Economic Studies, Manchester University)

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Abstract

We consider a multi-sector overlapping generations model with imperfectly competitive firms in the output markets and wage setting trade unions in the labour markets. A coordination problem between firms creates multiple temporary equilibria which are either Walrasian or of the Keynesian unemployment type. There exist many deterministic and stochastic equilibrium cycles fluctuating between Keynesian recession and Walrasian boom periods with arbitrarily long phases in each regime. The cycles are in accordance with certain empirical regularities. Money is neutral and superneutral, but appropriate countercyclical fiscal policies stabilize the cycles in a textbook Keynesian way.

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File URL: http://www.ihs.ac.at/publications/eco/es-83.pdf
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 83.

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Length: 37 pages
Date of creation: Sep 2000
Date of revision:
Handle: RePEc:ihs:ihsesp:83

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Keywords: Endogenous business cycles; Imperfect competition; Stabilization policy;

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Citations

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Cited by:
  1. Brito, Paulo B. & Costa, Luís F. & Dixon, Huw, 2013. "Non-smooth dynamics and multiple equilibria in a Cournot–Ramsey model with endogenous markups," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2287-2306.
  2. Kaas, Leo & Madden, Paul, 2004. "Non-existence of market-clearing wages when the output market is imperfectly competitive," Economics Letters, Elsevier, vol. 84(2), pages 175-182, August.
  3. Paulo Brito & Luis Costa & Huw Dixon, 2007. "Business Cycles with Endogenous Mark-ups," Money Macro and Finance (MMF) Research Group Conference 2006 108, Money Macro and Finance Research Group.

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