Disequilibrium Dynamics and the Stability of Quasi Equilibria

Israel German

The Quarterly Journal of Economics, 1985, vol. 100, issue 3, 571-596

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.

Date: 1985
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