A Dynamic Model of Monopolistic Competition with Trade Externalities and Fiscal Policy

Kee Nam Cheung

Chapter 12 in Increasing Returns and Economic Analysis, 1998, pp 255-277 from Palgrave Macmillan

Abstract: Abstract Two strands of thought have recently emerged in the ‘New Keynesian’ literature. The first is concerned with demand spillovers (externalities) and imperfect competition. Static models in this literature include Ng (1980, 1982), Hart (1982), Weitzman (1982), Heller (1986), Blanchard and Kiyotaki (1987), Roberts (1988), Cooper and John (1988) among others. The other strand concerns externalities arising from joint production, an example are the matching externalities in the goods and labour markets. These models are found in Diamond (1982), Howitt (1985), Drazen (1986), Howitt and McAfee (1986), Cooper and John (1988) among others. These externalities are also called ‘strategic complementarities’, the existence of which gives rise to Pareto-rankable multiple equilibria, Keynesian features and policy implications.

Keywords: Transaction Cost; Fiscal Policy; Aggregate Demand; Multiple Equilibrium; Balance Budget (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-26255-7_15

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DOI: 10.1007/978-1-349-26255-7_15

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