Romp, Graham (1988) Rational dynamic disequilibrium macro models with wage, price and inventory adjustment. PhD thesis, University of Warwick.

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Abstract

This thesis presents original and significant research on the foundations of dynamic disequilibrium macroeconomics and on the implications of such a modelling strategy. It represents a continuation of current research to provide an acceptable alternative to New Classical macroeconomics. Disequilibrium economics, contrary to New Classical economics, does not assume markets continually clear, and is concerned, in principle, with the dynamic response of an economy to disequilibrium by way of both price and quantity adjustments. It is only recently, however, that the early static disequilibrium models have been extended to include dynamics via price adjustment and other intertemporal linkages. This thesis furthers this line of research. Initial chapters concentrate on developing a rational basis for quantity constrained models, while subsequent chapters develop and analyse specific open and closed economy dynamic disequilibrium models. Chapters 2-4 critically assess New Classical economics; show that imperfect price adjustment can be derived from rational economic behaviour, given the presence of imperfect information and learning, incomprehensively indexed contracts, and small-menu costs; and discuss various disequilibrium modelling strategies. Chapters 5-6 employ the chosen modelling strategy (based on Sneessens, 1981) to develop dynamic disequilibrium models. Intertemporal linkages are established via wage, price and inventory adjustment. These models are used to test ‘the robustness of previously derived results and provide new results. Significant insights are gained into the possibility of long-run non-Walrasian equilibria, the existence of limit cycles, the importance of wage and price adjustment, and the behaviour of exchange rates within regime switching models. Further these models aid our understanding of trade and inventory cycles. Finally we analyse the effectiveness of government policy in the various disequilibrium models. Not all the New Classical policy conclusions remain valid when imperfect price adjustment is modelled consistently.

Item Type:	Thesis or Dissertation (PhD)
Subjects:	H Social Sciences > HB Economic Theory
Library of Congress Subject Headings (LCSH):	Equilibrium (Economics) -- Mathematical models, Macroeconomics, Limit cycles, Adjustments, Cost-of-living
Official Date:	1988
Dates:	Date Event 1988 UNSPECIFIED
Institution:	University of Warwick
Theses Department:	Department of Economics
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Wallis, Kenneth Frank ; Salmon, Mark
Sponsors:	Economic and Social Research Council (Great Britain)
Extent:	291 leaves : charts
Language:	eng

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