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Imperfect Competition and Macroeconomics: A Survey

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  • Dixon, Huw David
  • Rankin, Neil

Abstract

This survey outlines the general lessons of recent literature on imperfectly competitive macroeconomics for the theory of monetary and fiscal policy. A general framework is presented which nests most of the existing literature. Although money is of itself neutral, the presence of menu costs, non-unit-elastic expectations, or sectoral nominal rigidities results in an output- and welfare-increasing role for monetary policy. Imperfect competition alone is enough for fiscal policy to affect output but, without monetary nonneutrality, the effect is as likely to be negative as positive. Nevertheless, fiscally induced output increases are likely to be welfare increasing, unlike in competitive economies. Copyright 1994 by Royal Economic Society.

Suggested Citation

  • Dixon, Huw David & Rankin, Neil, 1994. "Imperfect Competition and Macroeconomics: A Survey," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 171-199, April.
  • Handle: RePEc:oup:oxecpp:v:46:y:1994:i:2:p:171-99
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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