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A Possibility of Protracted Output Gaps in an Economy without Any Rigidity


  • Taiji Harashima

    (The Cabinet Office of the Japanese Government)


The paper examines a new possibility of output gaps in an economy without any rigidity. The driving force behind the new possibility is non-cooperative behavior of consumers. The paper shows that there is a possibility that when a fundamental shock hits an economy this non- cooperative nature makes consumers deviate form the optimal path of the representative consumer, and thus agents do not jump consumption and proceed on the deviated transition path.

Suggested Citation

  • Taiji Harashima, 2004. "A Possibility of Protracted Output Gaps in an Economy without Any Rigidity," Microeconomics 0404007, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:0404007
    Note: Type of Document - pdf; pages: 48

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    References listed on IDEAS

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    Cited by:

    1. Harashima, Taiji, 2009. "Depression as a Nash Equilibrium Consisting of Strategies of Choosing a Pareto Inefficient Transition Path," MPRA Paper 18953, University Library of Munich, Germany.
    2. Harashima, Taiji, 2011. "A Mechanism of Cyclical Volatility in the Vacancy-Unemployment Ratio: What Is the Source of Rigidity?," MPRA Paper 32476, University Library of Munich, Germany.

    More about this item


    Output gaps; Disequilibrium; Intertemporal consumer choice; Business fluctuations;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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