Dynamic Structure of Disequilibrium Models
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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Volume (Year): 31 (1998)
Issue (Month): 1 ()
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