Citation

Discussion Paper Details

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Title: Monetary and Fiscal Policy in a `Hartian' Model of Imperfect Competition

Author(s): Neil Rankin

Publication Date: November 1987

Keyword(s): Fiscal Policy, Imperfect Competition, Keynesian Model, Monetary Policy, Price Expectations and Walrasian Equilibrium

Programme Area(s): International Macroeconomics

Abstract: Monetary and fiscal policy are introduced into a version of Hart's "Keynesian features" model of imperfect competition. Individuals' labour supply is exogenous, so, under perfect competition, output is always at the exogenous "full employment" level. Imperfect competition takes the form of Cournot-Nash quantity-setting trade unions, seeking to maximise their members' total wage income. Equilibrium with unemployment is then possible. In this case, fiscal policy (money-financed government spending increases) nearly always affects output, while monetary policy only does so if price expectations are not unit-elastic. Thus in Walrasian equilibrium, not only imperfect competition but also non-neutral money are needed for monetary effectiveness.

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Bibliographic Reference

Rankin, N. 1987. 'Monetary and Fiscal Policy in a `Hartian' Model of Imperfect Competition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=205