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An Extreme Keynesian Macro-economic Model with Formal Micro-economic Foundations

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  • Nicholas Rowe

Abstract

This paper presents a formal general-equilibrium model of a monetary economy in which agents' decision rules are derived from the underlying preferences, technology, endowments, and information. Firms face kinked demand curves for the reason given by J. Stiglitz (1979)-customers know the price at their current firm but not at other firms. The results are compatible with extreme Keynesian macroeconomic predictions, as presented by G. Woglom (1982). There is no automatic tendency to full employment, and a change in the money supply may cause a permanent change in real output with no change in prices.

Suggested Citation

  • Nicholas Rowe, 1987. "An Extreme Keynesian Macro-economic Model with Formal Micro-economic Foundations," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 306-320, May.
    • Handle: RePEc:cje:issued:v:20:y:1987:i:2:p:306-20
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A monetarist search model of keynesian unemployment
      by Nick Rowe in Worthwhile Canadian Initiative on 2011-04-05 07:31:31

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    Cited by:

    1. Ian M. McDonald & Hugh Sibly, 2005. "The Diamond Of Macroeconomic Equilibria And Non‐Inflationary Expansion," Metroeconomica, Wiley Blackwell, vol. 56(3), pages 393-409, July.
    2. Ronald Balvers, 1992. "A Keynesian general equilibrium model with competitive firms and rational expectations," Journal of Economics, Springer, vol. 56(1), pages 23-38, February.

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