Industrial Pricing and Growth Fluctuations in India

Ashima Goyal

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Microfoundations; countercyclical mark-ups; stability (search for similar items in EconPapers)
JEL-codes: D58 E32 (search for similar items in EconPapers)
Date: 1994
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Citations: View citations in EconPapers (2)

Published in Indian Economic Review 1.29(1994): pp. 13-32

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Related works:
Journal Article: Industrial Pricing and Growth Fluctuations in India (1994)
Working Paper: Industrial Pricing and Growth Fluctuations in India (1994)
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