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Disequilibrium Dynamics and the Stability of Quasi Equilibria

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  • Israel German

Abstract

This paper develops a dynamic disequilibrium macro model and examines its stability properties. We specify a rationing scheme that explicitly takes into account the spillover effects and differentiates between notional, effective, and actual quantities. A complete graphical representation of an economy under nonmarket-clearing trade conditions is then given. In a Solow-Stiglitz [1968] setting we develop a dynamic model in which the dynamic forces depend on the economic environment à la Malinvaud. The stability conditions for a stable quasi equilibrium in each region are derived, and it is shown that, in general, any two stable quasi-equilibrium points are separated by an unstable stationary point.

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  • Israel German, 1985. "Disequilibrium Dynamics and the Stability of Quasi Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 571-596.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:3:p:571-596.
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    File URL: http://hdl.handle.net/10.2307/1884370
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    Cited by:

    1. van Aarle, B. & Engwerda, J.C. & Plasmans, J.E.J. & Weeren, A.J.T.M., 1999. "Monetary and Fiscal Policy Design under EMU : A Dynamic Game Approach," Other publications TiSEM 0848f398-41bb-4e43-b83e-6, Tilburg University, School of Economics and Management.
    2. Bas Van Aarle & Jacob Engwerda & Joseph Plasmans & Arie Weeren, 2001. "Macroeconomic Policy Interaction under EMU: A Dynamic Game Approach," Open Economies Review, Springer, vol. 12(1), pages 29-60, January.

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