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On the Macroeconomics of Uncertainty and Incomplete Markets

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  • Jacques H.DREZE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))

Abstract

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 by-pass price and wage rigidities.

Suggested Citation

  • Jacques H.DREZE, 2001. "On the Macroeconomics of Uncertainty and Incomplete Markets," Discussion Papers (REL - Recherches Economiques de Louvain) 2001011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:2001011
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    References listed on IDEAS

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    Cited by:

    1. Hoog, S. van der, 2004. "On the Micro-Dynamics of a Cash-in-Advance Economy," CeNDEF Working Papers 04-12, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    2. Olivier SCAILLET, 2001. "Density Estimation Using Inverse and Reciprocal Inverse Guassian Kernels," LIDAM Discussion Papers IRES 2001017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Alessandro Citanna & Hervé Crès & Jacques H Drèze & P. Jean-Jacques Herings & Antonio Villanacci, 2001. "Underemployment of Resources and Self-Fulfilling Beliefs: Nonwalrasian Allocations at Walrasian Prices," SciencePo Working papers Main hal-01064886, HAL.
    4. E. Abdul Azeez, 2002. "Economic reforms and industrial performance: An analysis of capacity utilisation in Indian manufacturing," Centre for Development Studies, Trivendrum Working Papers 334, Centre for Development Studies, Trivendrum, India.
    5. repec:hal:spmain:info:hdl:2441/10287 is not listed on IDEAS
    6. Jacques H. Drèze & P. Jean‐Jacques Herings, 2008. "Kinky perceived demand curves and Keynes–Negishi equilibria," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(2), pages 207-246, June.
    7. Citanna, Alessandro & Cres, Herve & Dreze, Jacques & Herings, P. Jean-Jacques & Villanacci, Antonio, 2001. "Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices," Journal of Mathematical Economics, Elsevier, vol. 36(3), pages 169-200, December.
    8. Gerald Stuber, 2001. "Implications of Uncertainty about Long-Run Inflation and the Price Level," Staff Working Papers 01-16, Bank of Canada.
    9. Sander van der Hoog, 2004. "Credit and Cash-in-Advance in Disequilibrium Models," Computing in Economics and Finance 2004 294, Society for Computational Economics.
    10. Alessandro Citanna & Herve Cres & Antonio Villanacci, "undated". "Underemployment of resources and self-fulfilling beliefs: Nonwalrasian allocations at walrasian prices," GSIA Working Papers 11, Carnegie Mellon University, Tepper School of Business.
    11. Fagnart, Jean-Francois & Pierrard, O. & Sneessens, Henri R., 2007. "Microeconomic uncertainty and macroeconomic indeterminacy," European Economic Review, Elsevier, vol. 51(6), pages 1564-1588, August.
    12. repec:spo:wpecon:info:hdl:2441/10287 is not listed on IDEAS
    13. Bruinshoofd, W.A. & Letterie, W.A., 2001. "Comovement of sales, retention practice and financing constraints in Dutch manufacturing," Research Memorandum 003, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    14. repec:hal:wpspec:info:hdl:2441/10287 is not listed on IDEAS

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    More about this item

    Keywords

    Incomplete markets; wage and prices rigidities; supply-constrained equilibria; coordination failures;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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