Price flexibility and debt dynamics in a high order AS-AD model

Price flexibility and debt dynamics in a high order AS-AD model

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Article ID: iaor2009393
Country: Germany
Volume: 9
Issue: 1/2
Start Page Number: 119
End Page Number: 145
Publication Date: Jul 2001
Journal: Central European Journal of Operations Research
Authors: , ,
Abstract:

In this paper we reconsider extensions and modifications of earlier work on a disequilibrium model of AS-AD growth. Our dynamic model exhibits more or less sluggishly adjusting prices and quantities, Keynesian demand rationing and fluctuating capacity utilization for both labor and capital. Firms use debt (and pure profits) to finance their investment expenditures. We first prove that the resulting 7D core dynamics are convergent broadly speaking for low adjustment speeds.

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