Business Cycles in a Dynamic General Equilibrium Model with Monopolistic and Perfect Competition

Yıl 2020, , 11 - 33, 31.08.2020

Wei-bin Zhang

https://doi.org/10.33399/biibfad.644677

Öz

The purpose of this study is to explain business
cycles by developing a neoclassical growth model with perfect and monopolistic
competition. The study generalizes the model by Zhang (2019) by making all the
constant coefficients to be time dependent. The model determines income and
wealth distribution on the basis of Walrasian general equilibrium theory,
neoclassical growth theory, and Dixit-Stiglitz monopolistic competitive theory.
The paper makes a unique contribution to the literature of economic growth with
perfect and monopolistic competition by showing existence of business cycles
due to exogenous shocks in the model with the economic mechanisms in the three
main models of economic theory. The study shows how different shocks cause business
cycles as argued by real business theory in macroeconomics.

Anahtar Kelimeler

business cycle, solow model, Dixit-Stiglitz model, monopolistic competition

Kaynakça

• Arrow K.J. and Debreu, G. (1954) Existence of an Equilibrium for a Competitive Economy. Econometrica, 22(3), 265–90.
• Arrow, K.J. and Hahn, F.H. (1971) General Competitive Analysis. San Francisco: Holden-Day, Inc.
• Bertoletti, P. and Etro, F. (2015) Monopolistic Competition When Income Matters. The Economic Journal, 127(603), 1217-43.
• Burmeister, E. and Dobell, A.R. (1970) Mathematical Theories of Economic Growth. London: Collier Macmillan Publishers.
• Chang, W.W. (2012) Monopolistic Competition and Product Diversity: Review and Extension. Journal of Economic Surveys, 26(5), 879-910.
• Chiarella, C. and Flaschel, P. (2000) The Dynamics of Keynesian Monetary Growth: Macro Foundations. Cambridge University Press, Cambridge.
• Dixit, A. and Stiglitz, J.E. (1977) Monopolistic Competition and Optimum Product Diversity. American Economic Review, 67(3), 297-308.
• Flaschel, P., Franke, R., and Semmler, W. (1997) Dynamic Macroeconomics. The MIT Press, Mass., Cambridge.
• Krugman, P.R. (1979) A Model of Innovation, Technology Transfer, and the World Distribution of Income. Journal of Political Economy, 87(2), 253-66.
• Lorenz, H.W. (1993) Nonlinear Dynamic Economics and Chaotic Motion. Springer-Verlag, Berlin.
• Parenti, M., Ushchev, P., and Thisse, J.F. (2017) Toward a Theory of Monopolistic Competition. Journal of Economic Theory, 167(January), 86-115.
• Solow, R. (1956) A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70(1), 65-94.
• Spence, M. (1976) Product Selection, Fixed Costs and Monopolistic Competition. Review of Economic Studies, 43(2), 217-35.
• Tirole, J. (1988) The Theory of Industrial Organization. Cambridge: MIT Press.
• Walras, L. (1874) Elements of Pure Economics, translated from the French by W. Jaffé, 1954. London: Allen and Unwin.
• Waterson, M. (1984) Economic Theory of the Industry. Cambridge: Cambridge University Press.
• Zhang, W.B. (1993) Woman’s Labor Participation and Economic Growth - Creativity, Knowledge Utilization and Family Preference. Economics Letters, 42(1), 105-10.
• Zhang, W.B. (1991) Synergetic Economics. Springer-Verlag, Heidelberg.
• Zhang, W.B. (2005) Economic Growth Theory. Ashgate, London.
• Zhang, W.B. (2006) Discrete Dynamical Systems, Bifurcations and Chaos in Economics. Elsevier: Amsterdam.
• Zhang, W.B. (2008) International Trade Theory: Capital, Knowledge, Economic Structure,　Money and Prices over Time and Space. Berlin: Springer.
• Zhang, W.B. (2019) A Simple Growth Model Based on Neoclassical Growth, Monopolistic Competition, and Walrasian General Equilibrium Theories. International Journal of Academic Research in Business and Social Sciences 9(3), 1005-27.