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Walras--Keynes equilibria coordination and macroeconomics

  • Dreze, Jacques H.

In decentralised market economies, supply-constrained equilibria may persist as coordination failures, sustained but not caused by price rigidities. This feature may be arbitrarily severe, even at prices com- patible with competitive equilibrium. The supply-constraints may originate in rational expectations. Some implications for macroeco- nomics are drawn. The possibility of coordination failures explains why organised labour may resist wage flexibility. These features are il- lustrated in elementary macroeconomic prototypes, like RBC or Barro- Grossman-Malinvaud prototypes.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 41 (1997)
Issue (Month): 9 (December)
Pages: 1735-1762

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Handle: RePEc:eee:eecrev:v:41:y:1997:i:9:p:1735-1762
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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