Strategic complementarities, coordination failures, and macroeconomic fluctuations: from multiplicity of equilibria to disequilibrium dynamics

Alain Raybaut

The European Journal of the History of Economic Thought, 2024, vol. 31, issue 2, 325-354

Abstract: This paper retraces the main research avenues explored by some Keynesian macroeconomists from the mid-1980s to model aggregate fluctuations with strategic complementarities. Starting from the static coordination failure framework we identify the different devices implemented to deal with dynamics in deterministic or stochastic settings. The text examines how the analysis shifted from a multiplicity of equilibria to a multiplicity of steady states or equilibrium paths. From this standpoint, we confront the properties obtained under perfect foresight and alternative expectation formation schemes focussing on disequilibrium adjustments. The article also includes a tentative exploration of the reasons for the decline of this view.

Date: 2024
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Working Paper: Strategic complementarities, coordination failures, and macroeconomic fluctuations: from multiplicity of equilibria to disequilibrium dynamics (2024)
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DOI: 10.1080/09672567.2024.2357554

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