Final remarks

In this thesis, I have examined different approaches to dynamic macroeconomic theory with imperfect competition. The general framework introduced in Chapter 2 allows a characterization of different equilibrium concepts as stationary states of a dynamic process. It has been argued that the objective demand approach to dynamic macroeconomics must be questioned for the following reasons:First, as discussed in Chapters 2 and 3, the objective demand approach does not appear to be the appropriate concept of a short-run equilibrium, since the existence depends crucially on the specifications of the economy. Furthermore, even if objective equilibria exist, they are not more plausible limit outcomes of an adjustment process than other subjective equilibria. In some cases objective demand expectations may actually be more unrealistic than subjective ones.Second, even if an objective equilibrium was preferred as the appropriate short-run equilibrium concept, it has been shown in Chapter 4 that this approach would not be able to characterize unique long-run (stationary) equilibria. That is, intertemporal equilibria, in which all agents have rational expectations and in which all imperfect competitors maximize against their objective demand curve, are completely indeterminate.