Imperfectly competitive cycles with Keynesian and Walrasian features

Leo Kaas, Paul Madden

Research output: Contribution to journalArticlepeer-review


We consider a multi-sector overlapping generations model with oligopolistic firms in the output markets and wage-setting trade unions in the labour markets. A coordination problem between firms creates multiple temporary equilibria which are either Walrasian or of the Keynesian unemployment type. There exist many deterministic and stochastic equilibrium cycles fluctuating between Keynesian recession and Walrasian boom periods with arbitrarily long phases in each regime. The cycles are in accordance with certain empirical regularities. Money is neutral and superneutral, but appropriate countercyclical fiscal policies stabilize the cycles in a textbook Keynesian way. © 2003 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)861-886
Number of pages25
JournalEuropean Economic Review
Issue number4
Publication statusPublished - May 2005


  • Endogenous business cycles
  • Imperfect competition
  • Stabilization policy


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