Excess Demand, Expectations and Price Changes

Abstract

In this chapter, we focus on the empirical evidence pertaining to theories of price change which give a central role to excess demand, set within the context of an essentially competitive market environment. We begin with a discussion of the problems which arise in testing such theories, particularly the measurement of crucial variables. After a brief survey of previous work in this area, we present a summary of the results of our own empirical investigation in this area for 40 British manufacturing industries over the period 1963 to 1975.