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Dynamic Structure of Disequilibrium Models

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  • Qin, Duo
  • Lu, Maozu

Abstract

This paper investigates the dynamic structure of a standard disequilibrium model. By assuming that the model variables are non-stationary time series with respect to ample empirical evidence, we find the following: 1) it is the exogenous variables rather than the price adjustment process that form the real adjustment force of the model; 2) quantity disequilibrium and price disequilibrium are isomeric in the model, and follow a weakly stationary process when all the variables are I(1) nonstationary; 3) the disequilibrium process has a none-zero mean when the weakly exogenous variables of the demand equation do not cointegrate with those of the supply equation, corresponding to certain 'chronic disequilibrium' phenomena; and 4) the isomerism between quantity disequilibrium and price changes makes it unnecessary to lean on the 'min condition' to characterise disequilibrium. Copyright 1998 by Kluwer Academic Publishers

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  • Qin, Duo & Lu, Maozu, 1998. "Dynamic Structure of Disequilibrium Models," Economic Change and Restructuring, Springer, vol. 31(1), pages 15-27.
    • Handle: RePEc:kap:ecopln:v:31:y:1998:i:1:p:15-27
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    Cited by:

    1. Uctum, Remzi, 2007. "Économétrie des modèles à changement de régimes : un essai de synthèse," L'Actualité Economique, Société Canadienne de Science Economique, vol. 83(4), pages 447-482, décembre.
    2. Martins Kazaks & Duo Qin, 2002. "Short-run lats rate movements: impact of foreign currency shocks via trade and financial markets," UCL SSEES Economics and Business working paper series 26, UCL School of Slavonic and East European Studies (SSEES).
    3. Mirza, Faisal Mehmood & Bergland, Olvar, 2012. "Pass-through of wholesale price to the end user retail price in the Norwegian electricity market," Energy Economics, Elsevier, vol. 34(6), pages 2003-2012.

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