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On the macroeconomics of uncertainty and incomplete markets

  • DREZE, Jacques

    ()

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Presidential address for the Twelfth World Congress of the International Economic Association, summarising semi-formally the author’s recent work and concerns. Uncertainty and incomplete markets breed demand volatility as well as price and wage rigidities. The conjunction of these leads to multiple, volatile supply-constrained equilibria, typically reflecting coordination failures and apt to display persistence - as documented by three supporting theorems. Specific implications are linked to the conclusions that we should take coordination failures seriously, try to obviate demand volatility and try to bypass price and wage rigidities.

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File URL: http://alfresco.uclouvain.be/alfresco/download/attach/workspace/SpacesStore/b936ab21-c3a0-404e-ae45-eab45ff69e9e/coredp_1999_64.pdf
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1999064.

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Date of creation: 01 Nov 1999
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Handle: RePEc:cor:louvco:1999064
Contact details of provider: Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
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Fax: +32 10474304
Web page: http://www.uclouvain.be/core
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  1. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
  2. Dehez, Pierre & Dreze, Jacques H., 1984. "On supply-constrained equilibria," Journal of Economic Theory, Elsevier, vol. 33(1), pages 172-182, June.
  3. Bean, Charles R, 1984. "Optimal Wage Bargains," Economica, London School of Economics and Political Science, vol. 51(202), pages 141-49, May.
  4. Drèze, J. H., . "Walras-Keynes equilibria coordination and macroeconomics," CORE Discussion Papers RP -1309, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Bruce C. Greenwald & Joseph E. Stiglitz, 1988. "Financial Market Imperfections and Business Cycles," NBER Working Papers 2494, National Bureau of Economic Research, Inc.
  6. Ben S. Bernanke, 1980. "Irreversibility, Uncertainty, and Cyclical Investment," NBER Working Papers 0502, National Bureau of Economic Research, Inc.
  7. Gordon, Donald F, 1974. "A Neo-Classical Theory of Keynesian Unemployment," Economic Inquiry, Western Economic Association International, vol. 12(4), pages 431-59, December.
  8. Dreze, J. & Gollier, C., 1990. "Risk-sharing on the labour market and second-best wage rigidities," CORE Discussion Papers 1990067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Laan, Gerard van der, 1982. "Simplicial approximation of unemployment equilibria," Journal of Mathematical Economics, Elsevier, vol. 9(1-2), pages 83-97, January.
  10. repec:cup:cbooks:9780521479479 is not listed on IDEAS
  11. Roberts, John, 1987. "An Equilibrium Model with Involuntary Unemployment at Flexible, Competitive Prices and Wages," American Economic Review, American Economic Association, vol. 77(5), pages 856-74, December.
  12. Grandmont, Jean-Michel, 1989. " Keynesian Issues and Economic Theory," Scandinavian Journal of Economics, Wiley Blackwell, vol. 91(2), pages 265-93.
  13. Shadman-Mehta, Fatemeh & Sneessens, Henri R., 1998. "Demand-Supply Interactions and Unemployment Dynamics: Can there be Path Dependency ? The Case of Belgium, 1955-1994," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  14. Chichilnisky, G., 1992. "Existence and Optimality of a General Equilibrium with Endogenous Uncertainty," Papers 93-11, Columbia - Graduate School of Business.
  15. Champsaur, Paul & Dreze, Jacques H & Henry, Claude, 1977. "Stability Theorems with Economic Applications," Econometrica, Econometric Society, vol. 45(2), pages 273-94, March.
  16. Dreze, J., 1989. "The Role Of Securities And Labour Contracts In The Optimal Allocation Of Risk-Bearing," CORE Discussion Papers 1989008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Vickrey, William, 1993. "Today's Task for Economists," American Economic Review, American Economic Association, vol. 83(1), pages 1-10, March.
  18. Lubrano, Michel & Shadman-Mehta, Fatemeh & Sneessens, Henri R., 1993. "Real Wages, Quantity Constraints and Equilibrium Unemployment : Belgium 1955-1988," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1993011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  19. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
  20. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
  21. Hahn, F., 1992. "A Remark on Incomplete Market Equilibrium," Papers 179, Cambridge - Risk, Information & Quantity Signals.
  22. DREZE, Jacques H. & HERINGS, P. Jean-Jacques, 1998. "Continua of underemployment equilibria," CORE Discussion Papers 1998045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  23. Stiglitz, Joseph E, 1984. "Price Rigidities and Market Structure," American Economic Review, American Economic Association, vol. 74(2), pages 350-55, May.
  24. Dreze, J. H. & Malinvaud, E., . "Croissance et emploi: l'ambition d'une initiative européenne," CORE Discussion Papers RP -1098, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  25. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 37-50, January.
  26. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  27. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
  28. DREZE, Jacques H. & DURRE, Alain & SNEESSENS, Henri R., . "Investment stimulation, with some reference to housing," CORE Discussion Papers RP -1483, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  29. repec:dgr:kubcen:199805 is not listed on IDEAS
  30. Greenwald, Bruce C & Stiglitz, Joseph E, 1990. "Asymmetric Information and the New Theory of the Firm: Financial Constraints and Risk Behavior," American Economic Review, American Economic Association, vol. 80(2), pages 160-65, May.
  31. Rosen, Sherwin, 1985. "Implicit Contracts: A Survey," Journal of Economic Literature, American Economic Association, vol. 23(3), pages 1144-75, September.
  32. van der Laan, Gerard, 1984. "Supply-constrained fixed price equilibria in monetary economies," Journal of Mathematical Economics, Elsevier, vol. 13(2), pages 171-187, October.
  33. DREZE, Jacques H., . "Demand estimation, risk-aversion and sticky prices," CORE Discussion Papers RP -399, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  34. Dreze, Jacques H, 1975. "Existence of an Exchange Equilibrium under Price Rigidities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 301-20, June.
  35. DEHEZ, Pierre & DREZE, Jacques, . "Competitive equilibria with quantity-taking producers and increasing returns to scale," CORE Discussion Papers RP -819, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  36. repec:cai:reofsp:reof_p1994_49n1_0247 is not listed on IDEAS
  37. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  38. Bewley, Truman F., 1998. "Why not cut pay?," European Economic Review, Elsevier, vol. 42(3-5), pages 459-490, May.
  39. Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
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