Prices and Production Levels in the Closed Dynamic Input-Output System

Enrico Zaghini

The Manchester School of Economic & Social Studies, 1991, vol. 59, issue 3, 274-94

Abstract: In this paper a new theory of output level and price determination in a closed dynamic input-output framework is considered. This theory, suggested by Filippini, does not exhibit the well-known dual instability paradox, which characterizes the received theory of Leontief and Solow. After having highlighted some weaknesses of the new theory, it is shown that the most remarkable shortcoming of Filippini's output system (as well as of almost all literature on the subject) consists in not considering the constraints put in every period by available capital stocks. A variant of the model is suggested that is capable of overcoming such a difficulty. A variant of the price system is also presented where the desired rate of profit is determined endogenously. In this model prices, if coupled with the preceding output system, converge to natural prices. Copyright 1991 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:59:y:1991:i:3:p:274-94

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