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WAGE FLEXIBILITY AND THE STABILITY ARGUMENTS OF THE NEOCLASSICAL SYNTHESIS
Author(s) -
Flaschel Peter,
Franke Reiner
Publication year - 1996
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.1996.tb00384.x
Subject(s) - economics , disequilibrium , flexibility (engineering) , wage , keynesian economics , stability (learning theory) , labour economics , medicine , management , machine learning , computer science , ophthalmology
This note fills a lacuna in the neoclassical synthesis and completes its dynamic disequilibrium processes by including adjustments of the money wage rate in response to excess demand on the labour market. A Walrasian and a Keynesian variant are distinguished. While in the first case local asymptotic stability is always ensured, the equilibrium is unstable in the Keynesian case if money wages are too flexible relative to the adjustment speeds on the product and money markets.