IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Why Is a Financial Crisis Important? The Significance of the Relaxation of the Assumption of Perfect Competition

  • Yew-Kwang Ng

    (Department of Economics, Monash University, Australia)

Under the usual assumption of perfect competition, we have money being neutral and changes in nominal aggregate demand cannot affect the real economic variables. If so, a financial crisis cannot be very important. However, the real world is characterized more by non-perfect competition when changes in nominal demand can affect real variables. This paper shows the important differences and explains the crux of these differences from both the demand and cost sides. It also provides a simplified general-equilibrium analysis of the economy and shows that, by concentrating on a representative firm and on how this firm is affected by macro variables and simplified interaction with other firms, macro analysis of the economy without assuming perfect competition is manageable with more realistic and richer results.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ijbe.org/table%20of%20content/pdf/vol8-2/vol8-2-01.pdf
Download Restriction: no

File URL: http://www.ijbe.org/table%20of%20content/abstract/Vol.8/No.2/01.htm
Download Restriction: no

Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

Volume (Year): 8 (2009)
Issue (Month): 2 (August)
Pages: 91-114

as
in new window

Handle: RePEc:ijb:journl:v:8:y:2009:i:2:p:91-114
Contact details of provider: Postal: 100 Wenhwa Road, Seatwen, Taichung
Web page: http://www.ijbe.org/

More information through EDIRC

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.:

as in new window
  1. Huw Dixon, 2007. "Special issue: imperfect competition and contemporary macroeconomics. Editor’s introduction," Portuguese Economic Journal, Springer, vol. 6(2), pages 89-93, August.
  2. Ng, Yew-Kwang, 1982. "A Micro-Macroeconomic Analysis Based on a Representative Firm," Economica, London School of Economics and Political Science, vol. 49(194), pages 121-39, May.
  3. Holmström, Bengt & Tirole, Jean, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," IDEI Working Papers 40, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Naish, Howard F., 1988. "Imperfect competition, price adjustment costs, and the long-run Philips curve," Journal of Macroeconomics, Elsevier, vol. 10(1), pages 103-124.
  5. Naish, Howard F., 1993. "Imperfect competition as a micro foundation for keynesian macroeconomics: A graphical analysis," Journal of Macroeconomics, Elsevier, vol. 15(2), pages 273-299.
  6. Ahlin, Christian & Shintani, Mototsugu, 2007. "Menu costs and Markov inflation: A theoretical revision with new evidence," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 753-784, April.
  7. Ng, Yew-Kwang, 1977. "Aggregate Demand, Business Expectation, and Economic Recovery without Aggravating Inflation," Australian Economic Papers, Wiley Blackwell, vol. 16(28), pages 130-40, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ijb:journl:v:8:y:2009:i:2:p:91-114. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.