DYNAMIC STRUCTURE OF DISEQUILIBRIUM MODELS

This paper investigates the dynamic structure of a standard disequilib rium model. By assuming that the model variables are non-stationary ti me series with respect to ample empirical evidence, we find the follow ing: 1) It is the exogenous variables rather than the price adjustment process that form the real adjustment force of the model; 2) Quantity disequilibrium and price disequilibrium are isomeric in the model, an d follow a weakly stationary process when all the variables are I (1) nonstationary; 3) The disequilibrium process has a none-zero mean when the weakly exogenous variables of the demand equation do not cointegr ate with those of the supply equation, corresponding to certain 'chron ic disequilibrium' phenomena; 4) The isomerism between quantity disequ ilibrium and price changes makes it unnecessary to lean on the 'min co ndition' to characterise disequilibrium.