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Play-hysteresis in supply as part of a market model

  • Göcke, Matthias

Consequences of path-dependent supply side on the market equilibrium are illustrated. Supply is only a subsystem of the entire market with its forcing variable (price) being endogenous from the perspective of the entire market. This results in feedbacks on the equilibrium of price and quantity if transient exogenous disturbances occur. Aggregate hysteresis is modelled by continuous dynamics showing similarities to 'mechanical play'. This contrast the standard firm level modelling of hysteresis resulting from discontinuous (activity/inactivity) switches. Play dynamics are captured in a simple linearized way, just by adding two parameters to a supply equation.

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Paper provided by Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU) in its series Discussion Papers with number 61.

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Date of creation: 2012
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Handle: RePEc:zbw:zeudps:61
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  1. Belke, Ansgar & Goecke, Matthias & Guenther, Martin, 2012. "Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports – Sectoral Evidence for Some OECD Destinations," Ruhr Economic Papers 327, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  2. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  3. Matthias Gocke, 2001. "A Macroeconomic Model with Hysteresis in Foreign Trade," Metroeconomica, Wiley Blackwell, vol. 52(4), pages 449-473, November.
  4. Cross, R. & McNamara, H. & Pokrovskii, A.V. & Kalachev, L., 2010. "Hysteresis in the fundamentals of macroeconomics," SIRE Discussion Papers 2010-36, Scottish Institute for Research in Economics (SIRE).
  5. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Baldwin, Richard & Krugman, Paul, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 635-54, November.
  7. Delgado, Francisco A., 1991. "Hysteresis, menu costs, and pricing with random exchange rates," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 461-484, December.
  8. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
  9. Kenneth A. Froot & Paul Klemperer, 1988. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc.
  10. Cross, Rod, 1993. "On the Foundations of Hysteresis in Economic Systems," Economics and Philosophy, Cambridge University Press, vol. 9(01), pages 53-74, April.
  11. Herrmann, Roland & Kramb, Marc & Mönnich, Christina, 2000. "Tariff rate quotas and the economic impacts of agricultural trade liberalization in the WTO," Discussion Papers 1, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
  12. Laura Piscitelli, . "A Test for Strong Hysteresis," Computing in Economics and Finance 1997 2, Society for Computational Economics.
  13. Rod Cross, 2000. "Hysteresis and Emu," Metroeconomica, Wiley Blackwell, vol. 51(4), pages 367-379, November.
  14. repec:rwi:repape:0327 is not listed on IDEAS
  15. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
  16. Belke, Ansgar & Göcke, Matthias, 2004. "Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?," IZA Discussion Papers 1126, Institute for the Study of Labor (IZA).
  17. Ljungqvist, Lars, 1994. "Hysteresis in international trade: a general equilibrium analysis," Journal of International Money and Finance, Elsevier, vol. 13(4), pages 387-399, August.
  18. Richard Baldwin, 1989. "Sunk-Cost Hysteresis," NBER Working Papers 2911, National Bureau of Economic Research, Inc.
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