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Disequilibrium Dynamics and the Stability of Quasi Equilibria

Israel German
The Quarterly Journal of Economics
Vol. 100, No. 3 (Aug., 1985), pp. 571-596
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/1884370
Page Count: 26
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Disequilibrium Dynamics and the Stability of Quasi Equilibria
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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 non-market-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 a 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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