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Monetary Growth with Disequilibrium: a Non-Walrasian baseline model

Ogawa, Shogo (2020): Monetary Growth with Disequilibrium: a Non-Walrasian baseline model.

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In this study, we present a baseline monetary growth model for disequilibrium macroeconomics. Our model is similar to the existing Keynes-Wicksell models, but we highlight a characteristic of disequilibrium (non-Walrasian) macroeconomics, that is, the regime dividing in the static model. In addition, since we synthesize demand-side factors (Keynesian) and supply-side factors (neo-classical), we find a new effect on dynamical feedback loops, that is, the dual-decision effect. This new effect stabilizes (resp. destabilizes) an unstable (resp. a stable) feedback loop when the regime switches from the demand-side to the supply-side. Moreover, this dual-decision effect partly works on the real wage adjustment process and it enhances the instability if the economy is in Keynesian regime. We implement numerical experiments to confirm these results, and find that Walrasian equilibrium itself is not always stable.

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