Cointegration Theory, Equilibrium and Disequilibrium Economics

Karim Abadir and R. Larsson

Discussion Papers from University of Exeter, Department of Economics

Abstract: Two or more variables are said to be cointegrated when they move closely togather over time, after proper scaling. Cointegration was taken to be the statistical expression of the notion of equilibrium in economics. But is it still possible to talk of cointegration when "disequilibrium" economics prevails? This note argues that it is, and that the duality is strongest between cointegration theory and economic theories of nonclearing markets. By setting up a simple model, it is shown that Clower's (1965) Dual Decision Hypothesis is a more direct and natural expression of the notion of cointegration than Walrasian equilibrium is.

Keywords: time series; econometrics; cointegration; general equilibrium (search for similar items in EconPapers)
Pages: 6 pages
Date: 1994
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Journal Article: Cointegration Theory, Equilibrium and Disequilibrium Economics (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:9407

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