Complex business cycles and recurrent unemployment in a non-Walrasian macroeconomic model

In a dynamic non-tatonnement macroeconomic model, trades take place in each period even when prices are not Walrasian. Prices are adjusted between trading periods according to the intensity of disequilibrium, a reliable measure of which is obtained by means of stochastic rationing. The degree of downward nominal wage stickiness as well as government policy parameters are decisive for the dynamics that emerge. In particular, it is possible for the economy to converge to quasi-stationary states involving permanent unemployment and decreasing nominal wages or to produce complex business cycles with structural features recurrent over time but varying and unpredictable shape and size. (C) 2003 Elsevier Science B.V. All rights reserved.