Disequilibrium Growth Theory in an International Perspective

Charles Marrewijk and Jos Verbeek

Oxford Economic Papers, 1993, vol. 45, issue 2, 311-31

Abstract: The authors examine a two-good, small, open economy characterized by sluggish real wage rate adjustment. This causes short-run unemployment or excess-demand on the labor market, which in turn affects the speed of capital accumulation. Global stability is ensured under certain conditions, otherwise local stability and 'box' stability hold but endless business cycles cannot be long-run effects, i.e., may affect the long-run capital-labor ratio. The model is applied to examine the dynamic implications of a change in the terms-of-trade and of real wage rigidity. Copyright 1993 by Royal Economic Society.

Date: 1993
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