Abstract
In the long run, prices and wages are completely adjusted to their equilibrium values, while in the short run they can be assumed as fixed. In a business cycle perspective (and/or in intermediate-run models1), one needs a dynamic specification of how prices and wages change. In this way, the starting point of our analysis of business cycles interfaces with the Phillips curve debate, and one can introduce into the analysis a wage function whose dynamics can be conceived either in real or in nominal terms. Moreover, the models that we have discussed in the last sections of the previous chapter can be generalized in order to include inflation, and different structures are obtained according to the way in which the labor market is specified.
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References
See Chapters 8 and 9.
For a demonstration, see Ferri (1978).
For this debate, see Leijonhufvud (1968). It is important to stress that when one introduces dynamic equations, one has to talk about superneutrality of money to indicate that a higher growth rate in nominal money supply over time doe not imply a higher real output level.
These aspects are dealt with by Rose (1967) in the appendix to the paper.
See Hirsch-Smale (1974) and Medio (1979). A regular point is any point that is not a singular point. A differential limit cycle ordinarily has an unstable (repellor) fixed point but a global attractor, so that between the two must lie at least one closed boundary which constitutes a stable fixed motion, or limit cycle.
On these aspects see also Zarnowitz (1985) according to whom: “The model has debatable implications for the real wage movements and its shortcomings are apparent, given the lessons of the recent inflationary era. But all formal models are heavily restricted and the aspect covered here, namely the cyclical role of changes in the relative input/output prices are important enough to make the attempt interesting.” (pp. 543–544)
See Goodwin, Kruger and Vercelli (1984). See also Ploeg (1987).
The conditions for structural stability in a planar system are given by Peixoto (1962).
The Olech theorem on stability in the large cannot be applied in this model. For a discussion of this theorem, see Flaschel (1984).
Such neo-Classical growth models show stability in steady states. See Solow (1956).
See Malinvaud (1977 and 1981), Muellbauer and Portes (1978), and Benassy (1975 and 1986).
On this point, see Ito-Honkapohja (1982).
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© 1989 Springer-Verlag Berlin Heidelberg
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Ferri, P., Greenberg, E. (1989). Nonlinear Deterministic Labor Market Theories of Business Cycles. In: The Labor Market and Business Cycle Theories. Lecture Notes in Economics and Mathematical Systems, vol 325. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-00831-7_4
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DOI: https://doi.org/10.1007/978-3-662-00831-7_4
Publisher Name: Springer, Berlin, Heidelberg
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