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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. Martin Kazaks & Duo Qin, 2002. "Short-run Lats Rate Movements: Impact of Foreign Currency Shocks via Trade and Financial Markets," Working Papers 457, Queen Mary University of London, School of Economics and Finance.
    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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