Indeterminacy of macroeconomic equilibrium in a "Post Keynesian New Classical" model

Rosser Jr., J. Barkley
September 1991
Journal of Post Keynesian Economics;Fall91, Vol. 14 Issue 1, p111
Academic Journal
This article examines a simple idea that under certain conditions, the neoclassical aggregate supply and aggregate demand curves could coincide. This would suggest a continuum of possible macroeconomic equilibrium, resulting in a severe indeterminacy. This result can be viewed as a manifestation of the well-known tendency for multiple equilibrium to crop up in linear rational expectations models. A final implication of this possibility of the coincidence of long-run vertical aggregate supply and demand curves is the revived relevance of the Keynesian-type short-run analysis so scorned by the New Classical.


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