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PRICE‐QUANTITY ADJUSTMENTS IN A MACRO‐DISEQUILIBRIUM MODEL
Author(s) -
LORIE HENRI R.
Publication year - 1978
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1978.tb00287.x
Subject(s) - disequilibrium , economics , macro , unemployment , simple (philosophy) , keynesian economics , rational expectations , stability (learning theory) , econometrics , full employment , macroeconomics , medicine , philosophy , epistemology , machine learning , computer science , ophthalmology , programming language
This paper studies the dynamic properties of a simple macro‐economic model where exchange takes place outside equilibrium. It introduces an explicit treatment of the way the economic agents form sales expectations over time and specifies price and wages adjustments. This allows an analysis of the price‐quantity dynamics of an ongoing Neo‐Keynesian economy. The global stability properties of the full employment equilibrium are established although Keynesian results characterize the short run. Unemployment equilibria can only occur when extreme cases of pessimistic expectations are considered.