Dynamic Economic Models



So far we have only dealt with static models in the sense that they do not refer to any specific time period. In particular, none of the variables had time subscripts. In what sense are we to interpret such models?The interpretation, as we have shown in the previous chapter, depends upon the questions the models were set up to answer. All the models we have so far discussed were set up to establish equilibrium conditions and to answer questions by means of comparative statics. In other words, we ask what happens to the equilibrium values of the endogenous variables when an exogenous variable changes value. What we have is a snap shot of a system in equilibrium, then we disturb that system, wait until it comes to rest at another equilibrium and take a second snap shot, and then we compare the two pictures. We are not concerned with how the system gets from one equilibrium state to the next or how fast; in fact, it may only reach the new equilibrium in the infinite future.


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Copyright information

© F. Neal and R. Shone 1976

Authors and Affiliations

  1. 1.University of SalfordUK
  2. 2.University of SheffieldUK

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