The Review of Keynesian Studies
Online ISSN : 2435-6581
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Market-Period Adjustments, Short-Run and Long-Run Dynamics: A Keynesian Theory of Real Business Cycles
Marco Guerrazzi
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JOURNAL FREE ACCESS

2023 Volume 5 Pages 1-21

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Abstract

In this paper, relying on the seminal Keynesian analysis of the market for goods, I aim at integrating the market-period adjustments of relative-price expectations with the short-run dynamics generated by the occurrence of demand shocks and the long-run dynamics implied by capital accumulation and supply shocks. Specifically, I build a dynamic setting in which output, (un)employment and real wages tend to converge towards a non-deterministic short-run equilibrium pinned down by long-run entrepreneurial expectations. Furthermore, calibrating the model economy by taking as reference the US economy, I show that the cyclical properties of the resulting theoretical framework are consistent with a number of observed business cycle regularities.

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© 2023 The Keynes Society Japan
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