Econometric disequilibrium models

Four basic strands in the disequilibrium literature are identified. Some examples are discussed and the canonical econometric disequilibrium model and its estimation are dealt with in detail. Specific criticisms of the canonical model,dealing with price and wage rigidity, with the nature of the min condition and the price-adjustment equation, are considered and a variety of modifications is entertained. Tests of the “equilibrium vs. disequilibrium” hypothesis are discussed, as well as several classes of models that may switch between equilibrium and disequilibrium modes. Finally, consideration is given to multimarket disequilibrium models with particular emphasis on the problems of coherence and estimation.