IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/72157.html
   My bibliography  Save this paper

Industrial Pricing and Growth Fluctuations in India

Author

Listed:
  • Goyal, Ashima

Abstract

In a simple 2 sector general equilibrium macromodel profit maximization by a representative firm leads to multiple long-run non-Walrasian equilibria with excess profits and excess capacity. The model is reduced to two non-linear differential equations. Using calibration and simulation it is shown that yearly non-agricultural price and output series for the Indian economy are reproduced along dynamic medium-run adjustment trajectories approaching one or other of the equilibria. Alternative mark-up hypotheses are tested. The simulations show that the medium-run mark-up is counter-cyclical but has little variation. This behaviour of the mark-up plays an important part in maintaining stability, and explaining the historical price and output series. The model therefore helps to provide a microfoundation for structuralist macroeconomics.

Suggested Citation

  • Goyal, Ashima, 1994. "Industrial Pricing and Growth Fluctuations in India," MPRA Paper 72157, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:72157
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/72157/1/MPRA_paper_72157.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Diamond, Peter & Fudenberg, Drew, 1989. "Rational Expectations Business Cycles in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 606-619, June.
    2. Goyal, A., 1991. "Demand Supply and Savings Constraints in the Indian Economy," Papers 65, Indira Gandhi Institute of Development Research-.
    3. Jean-Paul Fitoussi, 1983. "Modern macroeconomic theory," Post-Print hal-03393109, HAL.
    4. Benassy, Jean-Pascal, 1993. "Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 732-761, June.
    5. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    6. Goyal, Ashima, 1994. "Growth dynamics in a general equilibrium macroeconomic model for India," Journal of Policy Modeling, Elsevier, vol. 16(3), pages 265-289, June.
    7. Barro, Robert J. & Fischer, Stanley, 1976. "Recent developments in monetary theory," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 133-167, April.
    8. Frank Hahn, 1978. "On Non-Walrasian Equilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(1), pages 1-17.
    9. Goyal, A., 1992. "The Role of Foreign Aid and the foreign exchange Constraint in Growth : Some Extensions," Papers 70, Indira Gandhi Institute of Development Research-.
    10. Ize, Alain, 1984. "Disequilibrium Theories, Imperfect Competition and Income Distribution: A Fix-Price Analysis," Oxford Economic Papers, Oxford University Press, vol. 36(2), pages 248-258, June.
    11. Stephen A. Marglin & Amit Bhaduri, 1988. "Profit Squeeze and Keynesian Theory," WIDER Working Paper Series wp-1988-039, World Institute for Development Economic Research (UNU-WIDER).
    12. Judd, Kenneth L., 1982. "An alternative to steady-state comparisons in perfect foresight models," Economics Letters, Elsevier, vol. 10(1-2), pages 55-59.
    13. Yew-Kwang Ng, 1985. "A Micro-Macroeconomic Analysis Based on a Representative Firm: Progress Report," Palgrave Macmillan Books, in: George R. Feiwel (ed.), Issues in Contemporary Macroeconomics and Distribution, chapter 8, pages 216-232, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goyal, Ashima & Dash, Shridhar, 2000. "The Money Supply Process in India: Identification, Analysis and Estimation," MPRA Paper 24632, University Library of Munich, Germany.
    2. Ashima Goyal, 1995. "The Simple Analytics of Aggregate Supply Demand and Structural Adjustment," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 30(2), pages 167-186, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goyal, Ashima, 1994. "Growth dynamics in a general equilibrium macroeconomic model for India," Journal of Policy Modeling, Elsevier, vol. 16(3), pages 265-289, June.
    2. Plassard, Romain, 2021. "Barro, Grossman, and the domination of equilibrium macroeconomics," MPRA Paper 107201, University Library of Munich, Germany.
    3. Bill Dupor, 2005. "Keynesian Conundrum: Multiplicity and Time Consistent Stabilization," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 154-177, January.
    4. Alessandro Balestrino & Lisa Grazzini & Annalisa Luporini, 2017. "A normative justification of compulsory education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(2), pages 537-567, April.
    5. Bennet T. McCallum, 1984. "A Linearized Version of Lucas's Neutrality Model," Canadian Journal of Economics, Canadian Economics Association, vol. 17(1), pages 138-145, February.
    6. Franco Modigliani & Lucas Papademos, 1978. "Optimal demand policies against stagflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 736-782, December.
    7. François Gardes, 2021. "Endogenous Prices in a Riemannian Geometry Framework," Post-Print halshs-03325414, HAL.
    8. Paulo Brito & Bipasa Datta & Huw Dixon, 2011. "The evolution of mixed conjectures in the rent-extraction game," Discussion Papers 11/06, Department of Economics, University of York.
    9. Kan, Kamhon & Fu, Tsu-Tan, 1997. "Analysis of Housewives' Grocery Shopping Behavior in Taiwan: An Application of the Poisson Switching Regression," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 29(2), pages 397-407, December.
    10. Sniekers, F.J.T., 2013. "Endogenous Beveridge cycles and the volatility of unemployment," CeNDEF Working Papers 13-12, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    11. Noriko Amano, 2018. "Nutrition Inequality: The Role of Prices, Income, and Preferences," 2018 Meeting Papers 453, Society for Economic Dynamics.
    12. Paweł Kopiec, 2023. "Frictional product market, supply chains and the impact of government expenditures on private consumption," Bank i Kredyt, Narodowy Bank Polski, vol. 54(3), pages 285-308.
    13. Kiyotaki, Nobuhiro & Lagos, Ricardo & Wright, Randall, 2016. "Introduction to the symposium issue on money and liquidity," Journal of Economic Theory, Elsevier, vol. 164(C), pages 1-9.
    14. Kitagawa, Akiomi & Shibata, Akihisa, 2001. "Long gestation in an overlapping generations economy: endogenous cycles and indeterminacy of equilibria," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 99-127, February.
    15. Sebastian Edwards & Sweder van Wijnbergen, 1983. "The Welfare Effects of Trade and Capital Market Liberalization: Consequences of Different Sequencing Scenarios," NBER Working Papers 1245, National Bureau of Economic Research, Inc.
    16. Kala Krishna & Cemile Yavas, 2004. "Lumpy consumer durables, market power, and endogenous business cycles," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 375-391, May.
    17. Patrick Artus, 1993. "Défauts de coordination des activités. Principes et exemples," Revue Économique, Programme National Persée, vol. 44(3), pages 551-568.
    18. Babenko, R. & Talman, A.J.J., 2006. "Quantity Constrained General Equilibrium," Other publications TiSEM 393bf7c1-3045-4a3b-b3c3-5, Tilburg University, School of Economics and Management.
    19. M. Shahe Emran & M. Imam Alam & Forhad Shilpi, 2003. "After the "License Raj": Economic Liberalization and Aggregate Private Investment in India," Development and Comp Systems 0305002, University Library of Munich, Germany, revised 30 Aug 2003.
    20. Sebastian Edwards, 1987. "Economics Liberalization and the Equilibrium Real Exchange Rate in Developing Countries," UCLA Economics Working Papers 433, UCLA Department of Economics.

    More about this item

    Keywords

    Microfoundations; countercyclical mark-ups; stability;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:72157. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.