Monopolistic Competition as a Foundation for Keynesian Macroeconomic Models
Quarterly Journal of Economics
1989
A general equilibrium macroeconomic model based on monopolistic competition is presented. The model exhibits a traditional multiplier in the short run, but due to free entry, the multiplier disappears in the long run. By construction all agents are fully rational. The Keynesian results are a consequence of the assumption of monopolistic competition, which creates a divergence between optimal private behavior and optimal social behavior.
- DOI
- 10.2307/2937865
- Volume
- 104 (4)
- Pages
- 737
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- Sources
- crossref openalex