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Microeconomic Uncertainty and Macroeconomic Indeterminacy

Jean-François Fagnart and Henri Sneessens ()
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Jean-François Fagnart: Université de Cergy-Pontoise, THEMA

No 2001007, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We construct a stylised intertemporal macroeconomic model to illustrate how the combination of decentralised trading and microeconomic uncertainty can generate coordination problems and indeterminacy of the macroeconomic equilibrium. With a competitive labour market and a fixed labour supply, the range of equilibria depends mainly on the variance of the idiosyncratic shocks and may thus remain fairly narrow. The situation is different when there is imperfect competition on the labour market. The existence of real rigidities is apt to considerably increase the size of the interval of indeterminacy, for a given variance of the shocks.

Keywords: indeterminacy; non-Walrasian economy; equilibrium unemployment; coordination; continuum of equilibria (search for similar items in EconPapers)
JEL-codes: E10 E24 (search for similar items in EconPapers)
Pages: 30
Date: 2001-04-01
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Journal Article: Microeconomic uncertainty and macroeconomic indeterminacy (2007) Downloads
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