A Disequilibrium Macroeconomic Model with Stochastic Rationing

Abstract

A purpose of this paper is to fill a gap between the recent development in the microeconomic analysis of quantity constraints and the conventional disequilibrium macroeconomics where the Clower-Benassy effective demand has been used. Although Gale and Svensson defined a concept of effective demand with rigorous microfoundations, which the Clower-Benassy effective demand lacks, their models do not provide with insights about macroeconomic consequences, such as a well-known classification of quantityconstrained equilibria: Keynesian unemployment, Classical unemployment, and Repressed inflation. This paper will (i) characterize simple macroeconomic framework with satisfactory microeconomic foundations; and (ii) show that multiple types of stochastic rationing equilibria, given the set of prices, are a very common phenomenon in contrast to the uniqueness in the conventional models.