Cointegration Theory, Equilibrium and Disequilibrium Economics
AbstractTwo or more variables are said to be cointegrated when they move closely togather over time, after proper scaling. Cointegration was taken to be the statistical expression of the notion of equilibrium in economics. But is it still possible to talk of cointegration when "disequilibrium" economics prevails? This note argues that it is, and that the duality is strongest between cointegration theory and economic theories of nonclearing markets. By setting up a simple model, it is shown that Clower's (1965) Dual Decision Hypothesis is a more direct and natural expression of the notion of cointegration than Walrasian equilibrium is.
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Bibliographic InfoPaper provided by Exeter University, Department of Economics in its series Discussion Papers with number 9407.
Length: 6 pages
Date of creation: 1994
Date of revision:
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time series; econometrics; cointegration; general equilibrium;
Other versions of this item:
- Karim Maher Abadir, 2004. "Cointegration Theory, Equilibrium and Disequilibrium Economics," Manchester School, University of Manchester, vol. 72(1), pages 60-71, 01.
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