Disequilibrium Dynamics and the Stability of Quasi Equilibria

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.