Monetary growth with disequilibrium: A non-Walrasian baseline model

Abstract

In this study, we present a baseline monetary growth model of disequilibrium macroeconomics similar to the existing Keynes-Wicksell model. However, we highlight a characteristic of disequilibrium (non-Walrasian) macroeconomics, specifically the regime dividing in the static model. In addition, because we synthesize demand-side factors (Keynesian) and supply-side factors (neo-classical), we find a new effect on the dynamic feedback loops; that is, the dual-decision effect. This new effect stabilizes/destabilizes an unstable/stable feedback loop when the regime switches from the demand-side to the supply-side. Moreover, this dual-decision effect partly works in the real wage adjustment process and enhances instability if the economy is in a Keynesian regime. We implement numerical experiments to confirm these results, and find that the Walrasian equilibrium itself is not always stable.