Faculty of Economics and Business Administration Publications Database

Imperfectly competitive cycles with Keynesian and Walrasian features

Madden, Paul
Volume: 49
Pages: 861 - 886
Month: May
ISSN-Print: 0014-2921
Link External Source: Online Version
Year: 2005
Keywords: Endogeneous business cycles; Imperfect competition; Stabilzation policy

We consider a multi–sector overlapping generations model with oligopolistic 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.
(This abstract was borrowed from another version of this item.)