We present a dynamic macroeconomic model in which trades take place in each period even when prices are not at their Walrasian level. Prices and wages are adjusted between periods according to the intensity of rationing, a reliable measure of which is obtained through stochastic rationing. Dynamic adjustment equations are derived and implemented in a simulation program. The simulations show that structural parameters like the adjustment speed of prices and government policy parameters are decisive for the type of dynamics that emerges. In particular nominal wage stickiness stabilizes the economy whereas high wage flexibility favors cyclical and irregular behavior.
Bignami, F., Colombo, L. V. A., Weinrich, G., A Dynamic Non-Tatonnement Macroeconomic Model with Stochastic Rationing, in William A. Barnett, C. D. G. F., Economic Complexity. Non-linear Dynamics, Multi-agents Economies, and Learning, Elsevier, Amsterdam 2004 <<INTERNATIONAL SYMPOSIA IN ECONOMIC THEORY AND ECONOMETRICS>>,: 301-331 [http://hdl.handle.net/10807/25659]
A Dynamic Non-Tatonnement Macroeconomic Model with Stochastic Rationing
Bignami, Fernando;Colombo, Luca Vittorio Angelo;Weinrich, Gerd
2004
Abstract
We present a dynamic macroeconomic model in which trades take place in each period even when prices are not at their Walrasian level. Prices and wages are adjusted between periods according to the intensity of rationing, a reliable measure of which is obtained through stochastic rationing. Dynamic adjustment equations are derived and implemented in a simulation program. The simulations show that structural parameters like the adjustment speed of prices and government policy parameters are decisive for the type of dynamics that emerges. In particular nominal wage stickiness stabilizes the economy whereas high wage flexibility favors cyclical and irregular behavior.
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