Keynesian disequilibrium dynamics: Estimated convergence, roads to instability and the emergence of complex business fluctuations

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dc.contributor.author Chiarella, Carl en_US
dc.contributor.author Hung, Hing en_US
dc.contributor.author Flaschel, Peter en_US
dc.contributor.editor en_US
dc.date.accessioned 2011-02-07T06:26:07Z
dc.date.available 2011-02-07T06:26:07Z
dc.date.issued 2010 en_US
dc.identifier 2009005350 en_US
dc.identifier.citation Chiarella Carl, Hung Hing, and Flaschel Peter 2010, 'Keynesian disequilibrium dynamics: Estimated convergence, roads to instability and the emergence of complex business fluctuations', Charles University, vol. 4, no. 3, pp. 236-262. en_US
dc.identifier.issn 1802-4696 en_US
dc.identifier.other W1 en_US
dc.identifier.uri http://hdl.handle.net/10453/13931
dc.description.abstract We reformulate the traditional AS-AD growth model of the Neoclassical Synthesis (stage I) with a Taylor policy rule replacing the conventional LM-curve, with gradually adjusting wages as well as prices, and with perfect foresight on current inflation rates and an adaptively revised notion of an inflationary climate in which the economy is operating. We compare this approach with the New Keynesian approach, the Neoclassical Synthesis, stage II, with staggered price and wage setting and find various common components, yet with radically different dynamic implications due to our treatment of the forward-looking part of our wage-price spiral. We show for a system estimate of our model that it implies qualitatively local asymptotic stability and when its estimated form is simulated in response to isolated shocks strongly damped business fluctuations, due to a stable interaction of goods market dynamics with the interest rate policy of the central bank and due to a normal working of a real-wage feedback chain. These results are however endangered a?? leading in fact to economic breakdown a?? when there is a global floor to money wage inflation rates. In this case, the return of some money wage flexibility in deep depressions is of help in restoring viability of the model, thereby even avoiding explosive dynamics and the collapse of the economy. This situation leads to viable, but complex business fluctuations en_US
dc.language en_US
dc.publisher Charles University en_US
dc.relation.isbasedon NA en_US
dc.title Keynesian disequilibrium dynamics: Estimated convergence, roads to instability and the emergence of complex business fluctuations en_US
dc.parent QFRC Research Paper en_US
dc.journal.volume 4 en_US
dc.journal.number 3 en_US
dc.publocation Prague, Czech Republic en_US
dc.identifier.startpage 236 en_US
dc.identifier.endpage 262 en_US
dc.cauo.name BUS.School of Finance and Economics en_US
dc.conference Verified OK en_US
dc.for 140100 en_US
dc.personcode 716350 en_US
dc.personcode 030348 en_US
dc.personcode 0000017722 en_US
dc.percentage 100 en_US
dc.classification.name Economic Theory en_US
dc.classification.type FOR-08 en_US
dc.edition en_US
dc.custom en_US
dc.date.activity en_US
dc.location.activity en_US
dc.description.keywords DAS-DAD dynamics; wage and price Phillips curves; real interest effects; real wage effects; (in)stability; persistent business cycles; complex dynamics en_US


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