Endogenous Growth, Price Stability and Market Disequilibria
AbstractResorting to an endogenous growth framework, the paper studies the implications of taking market clearing as a long term possibility rather than an every period implicit assumption, as is conventional in growth analysis. Under the proposed setup, the system may converge to a market equilibrium outcome in the same way it can converge to a state of constant growth; however, local instability may deviate the economy from the long run stable result. The underlying main assumption respects to an adjustment mechanism in which: (i) transitional dynamics are characterized by the persistence of an accumulated market imbalance; (ii) monetary authorities are able to guarantee price stability. The implications of this modelling structure are the following: (a) a market clearing equilibrium may co-exist with other equilibrium points; (b) several types of stability outcomes are obtainable; (c) monetary policy becomes relevant for growth.
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Bibliographic InfoPaper provided by ISCTE-IUL, Business Research Unit (BRU-IUL) in its series Working Papers Series 1 with number ercwp0608.
Length: 34 pages
Date of creation: 15 Jun 2008
Date of revision:
Endogenous Growth; Non-equilibrium Models; Keynesian Macroeconomics; Local Stability analysis; monetary policy.;
Other versions of this item:
- Orlando Gomes, 2010. "Endogenous Growth, Price Stability And Market Disequilibria," Metroeconomica, Wiley Blackwell, vol. 61(1), pages 3-34, 02.
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
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