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On the Macroeconomics of Uncertainty and Incomplete Markets*

Published online by Cambridge University Press:  17 August 2016

Jacques H. Drèze
Jacques H. Drèze*
Affiliation:
CORE, Université Catholique de Louvain
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Summary

Presidential address for the Twelfth World Congress of the International Economic Association, summarising semi-formally the author’s recent work and concerns. Uncertainty and incomplete markets breed demand volatility as well as price and wage rigidities. The conjunction of these leads to multiple, volatile supply-constrained equilibria, typically reflecting coordination failures and apt to display persistence – as documented by three supporting theorems. Specific implications are linked to the conclusions that we should take coordination failures seriously, try to obviate demand volatility and try to by-pass price and wage rigidities.

Résumé

Résumé

Discours présidentiel au douzième congrès mondial de l’Association Internationale des Sciences économiques, résumant de façon semi-formelle les travaux et intérêts récents de l’auteur. Incertitude et marchés incomplets entraînent volatilité de la demande agrégée et rigidités de certains prix et salaires. La conjonction de ces deux phénomènes conduit à des équilibres avec rationnement de l’offre qui sont multiples et volatiles, qui reflètent des insuffisances de coordination et sont susceptibles de persistance. Trois théorèmes documentent ces assertions. En conséquence, il importe de prendre en compte les problèmes de coordination, de définir des politiques spécifiques et soutenables dans le temps, susceptibles de compenser la volatilité de la demande et de contourner les rigidités de prix et salaires.

Keywords

incomplete marketswage and price rigiditiessupply-constrained equilibriacoordination failuresE10E12E32E10E12E32
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 67 , Issue 1 , 2001 , pp. 5 - 30
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2001 

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Footnotes

**

dreze@core.ucl.ac.be

*

Presidential address for the Twelfth World Congress of the International Economic Association, Buenos Aires, August 1999; also presented as the second Kurt W. Rothschild Lecture, University of Linz, November 1999. I thank Heracles Polemarchakis and Henri Sneessens for editorial comments.

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