RATIONAL FIX-PRICE DYNAMICS

We study a macroeconomic model where stabilization problems arise as t he result of a dynamic game of income distribution between capitalists and workers. The two agents control the supply sides of the goods and labor markets, respectively, using price changes as strategic variabl es, and a static fix-price model with money, labor and one macro-commo dity to correctly predict the behaviour of the economy at each instant of time. The resulting medium-run price dynamics is consistent with m ajor stylized facts on business cycles, it accounts for an empirical r egularity that has been left unexplained by other models, and suggests a new relationship between the functional income distribution and the economy's sensitivity to shocks.