Browsing by Author "Honkapohja, Seppo"

Now showing 1 - 4 of 4
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    A Disequilibrium Macroeconomic Model with Stochastic Rationing
    (Center for Economic Research, Department of Economics, University of Minnesota, 1980-04) Honkapohja, Seppo; Ito, Takatoshi
    A purpose of this paper is to fill a gap between the recent development in the microeconomic analysis of quantity constraints and the conventional disequilibrium macroeconomics where the Clower-Benassy effective demand has been used. Although Gale and Svensson defined a concept of effective demand with rigorous microfoundations, which the Clower-Benassy effective demand lacks, their models do not provide with insights about macroeconomic consequences, such as a well-known classification of quantityconstrained equilibria: Keynesian unemployment, Classical unemployment, and Repressed inflation. This paper will (i) characterize simple macroeconomic framework with satisfactory microeconomic foundations; and (ii) show that multiple types of stochastic rationing equilibria, given the set of prices, are a very common phenomenon in contrast to the uniqueness in the conventional models.
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    Inventory Dynamics in a Simple Disequilibrium Macroeconomic Model
    (Center for Economic Research, Department of Economics, University of Minnesota, 1979-11) Honkapohja, Seppo; Ito, Takatoshi
    The paper formulates and analyzes a simple piecewise linear macroeconomic model with buffer stock inventories. Buffer stocks partly eliminate the rationing of the demand for goods, since rationing appears only when a stock-out in possible. This means that the region of Classical Unemployment necessarily shrinks, and it even disappears when buffer stocks absorb all the randomness of aggregate demand for goods. The inventory dynamics with constant wages and prices have steady states either in the region of Keynesian Unemployment or Repressed Inflation. In the former case the motion is oscillatory and either converges or ends in a limit cycle, while in the latter it is monotonic. Some of the complications caused by flexible wages and prices are sketched but the results are heavily dependent on the nature of wage and price adjustments.
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    On Stochastic Rationing Equilibrium
    (Center for Economic Research, Department of Economics, University of Minnesota, 1980-05) Honkapohja, Seppo; Ito, Takatoshi
    Difficulties in the concept of effective demand in the standard approaches to the analysis of non-clearing markets have led to considerations of trading uncertainty or stochastic rationing. In the earlier litterature it has been shown that under certain conditions the stochastic rationing mechanism has a linearity property. The purpose of this -paper is to analyze the existence of an equilibrium with positive trading under a mechanism of stochastic rationing. Sufficient conditions for this kind of "non-trivial" equilibrium are developed in a model with overlapping generations and production. As a by-product it is shown how the theory of continuos probabilistic expectations, due to Grandmont can be extended to take into account the possibility of rationing expected in the future.
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    Stability with Regime Switching
    (Center for Economic Research, Department of Economics, University of Minnesota, 1980-07) Honkapohja, Seppo; Ito, Takatoshi
    The purpose of this paper is to analyze stability of a system of piecewise continuous differential equations, and its application to disequilibrium economic models. A unique solution in the sense of Filippov for such a system is defined and claimed to exist. This problem frequently appears in disequilibrium models, since the so-called " shortside" rule assigns either demand or supply to the transaction amount which is a state variable of an economic system. The concept of Filippov solution makes it possible to analyze a dynamic evolution of such a model. This paper demonstrates that (i) stability conditions for each piecewise system of differential equations are neither necessary nor sufficient for the overall stability with regime switching, except special cases such as a system of linear differential equations in R2, with two regimes separated by a linear boundary; (ii) several sufficient conditions for an overall stability with many regimes are available, making use of a Lyapunov function common to all regimes; (iii) stability theorems with regime switching are useful for disequilibrium economic models with several regimes.