Abstract
Two strands of thought have recently emerged in the ‘New Keynesian’ literature. The first is concerned with demand spillovers (externalities) and imperfect competition. Static models in this literature include Ng (1980, 1982), Hart (1982), Weitzman (1982), Heller (1986), Blanchard and Kiyotaki (1987), Roberts (1988), Cooper and John (1988) among others. The other strand concerns externalities arising from joint production, an example are the matching externalities in the goods and labour markets. These models are found in Diamond (1982), Howitt (1985), Drazen (1986), Howitt and McAfee (1986), Cooper and John (1988) among others. These externalities are also called ‘strategic complementarities’, the existence of which gives rise to Pareto-rankable multiple equilibria, Keynesian features and policy implications.
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Cheung, K.N. (1998). A Dynamic Model of Monopolistic Competition with Trade Externalities and Fiscal Policy. In: Arrow, K.J., Ng, YK., Yang, X. (eds) Increasing Returns and Economic Analysis. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-26255-7_15
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