Proponents of New Keynesian Economics (NKE) have defined their research agenda as within the Keynesian tradition where a market (supply) failure (i.e., a coordination failure) induces nominal wage/price fixities. This paper demonstrates that NKE models are not only logically incompatible with...

This paper explains why once non-probabilistic (i.e., a non-ergodic stochastic system) uncertainty is introduced into an orthodox freely flexible exchange rate model, the concept of the elasticity of expectations explains the open economy system will be extremely unstable except under the most...