Capacity Utilization, Inflation, and Monetary Policy: The Duménil and Lévy Macro Model and the New Keynesian Consensus

The article considers the adjustment toward long-run equilibrium within the Duménil and Lévy macro model, with modifications. Findings show that long-run convergence to fully adjusted positions with normal utilization is not achieved when a more realistic reaction function is proposed. Classical equilibrium occurs when a vertical Phillips curve is substituted, but the model is isomorphic to the “new consensus†model and to features of “new†endogenous growth theory. JEL classification: E12, E40, E52, E58