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Imperfectly Competitive Cycles with Keynesian and Walrasian Features

Author

Listed:
  • Kaas, Leo

    (Department of Economics, University of Vienna)

  • Madden, Paul

    (School of Economic Studies, Manchester University)

Abstract

We consider a multi-sector overlapping generations model with imperfectly competitive firms in the output markets and wage setting trade unions in the labour markets. A coordination problem between firms creates multiple temporary equilibria which are either Walrasian or of the Keynesian unemployment type. There exist many deterministic and stochastic equilibrium cycles fluctuating between Keynesian recession and Walrasian boom periods with arbitrarily long phases in each regime. The cycles are in accordance with certain empirical regularities. Money is neutral and superneutral, but appropriate countercyclical fiscal policies stabilize the cycles in a textbook Keynesian way.

Suggested Citation

  • Kaas, Leo & Madden, Paul, 2000. "Imperfectly Competitive Cycles with Keynesian and Walrasian Features," Economics Series 83, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:83
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    File URL: http://www.ihs.ac.at/publications/eco/es-83.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Paulo Brito & Luis Costa & Huw Dixon, 2007. "Business Cycles with Endogenous Mark-ups," Money Macro and Finance (MMF) Research Group Conference 2006 108, Money Macro and Finance Research Group.
    2. Brito, Paulo B. & Costa, Luís F. & Dixon, Huw, 2013. "Non-smooth dynamics and multiple equilibria in a Cournot–Ramsey model with endogenous markups," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2287-2306.
    3. Kaas, Leo & Madden, Paul, 2004. "Non-existence of market-clearing wages when the output market is imperfectly competitive," Economics Letters, Elsevier, vol. 84(2), pages 175-182, August.

    More about this item

    Keywords

    Endogenous business cycles; Imperfect competition; Stabilization policy;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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