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Business Cycles in a Dynamic General Equilibrium Model with Monopolistic and Perfect Competition

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  • Wei-bin ZHANG

    (Ritsumeikan Asia Pacific University)

Abstract

The purpose of this study is to explain business cycles by developing a neoclassical growth model with perfect and monopolistic competition. The study generalizes the model by Zhang (2019) by making all the constant coefficients to be time dependent. The model determines income and wealth distribution on the basis of Walrasian general equilibrium theory, neoclassical growth theory, and Dixit-Stiglitz monopolistic competitive theory. The paper makes a unique contribution to the literature of economic growth with perfect and monopolistic competition by showing existence of business cycles due to exogenous shocks in the model with the economic mechanisms in the three main models of economic theory. The study shows how different shocks cause business cycles as argued by real business theory in macroeconomics.

Suggested Citation

  • Wei-bin ZHANG, 2020. "Business Cycles in a Dynamic General Equilibrium Model with Monopolistic and Perfect Competition," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 4(1), pages 11-33, August.
    • Handle: RePEc:bgo:journl:v:4:y:2020:i:1:p:11-33repec/bgo/
    DOI: https://doi.org/10.33399/biibfad.644677
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    References listed on IDEAS

    as
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    3. Winston W. Chang, 2012. "Monopolistic Competition And Product Diversity: Review And Extension," Journal of Economic Surveys, Wiley Blackwell, vol. 26(5), pages 879-910, December.
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    5. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    8. Zhang, Wei-Bin, 1993. "A woman's labor participation and economic growth : Creativity, knowledge utilization and family preference," Economics Letters, Elsevier, vol. 42(1), pages 105-110.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business cycles; Solow growth model; periodic shocks; Dixit-Stiglitz model; monopolistic competition;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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