The dynamics of magnetosphere-ionosphere coupling has been investigated by means of a two-dimensional two-fluid MHD model including anomalous resistivity. When field-aligned current is generated on auroral field lines, the disturbance propagates toward the ionosphere in the form of a kinetic Alfv¿n wave. When the current exceeds a critical value, microscopic turbulence is produced, which modifies the propagation of the Alfv¿n wave. This process is modeled by a nonlinear collision frequency, which increases with the excess of the drift velocity over the critical value. The system evolves toward an electrostatic structure, with the perpendicular electric field having a shorter scale than the field-aligned current. The approach to a steady state is strongly dependent on the presence or absence of the turbulence and on the boundary conditions imposed in the generator. As current is increased or scale size is decreased, the turbulent region reflects and absorbs most of the Alfv¿n wave energy, decoupling the generator from the ionosphere.