Abstract
In this chapter we derive and discuss the 39D intensive (state variable) form of the general structural model of disequilibrium growth we have introduced and discussed on its extensive form level in chapter 7.1 We will represent the resulting 39D dimensional dynamical system, obtained from this extensive form of the model, from various perspectives, providing compact intensive form representations of the real and the financial sector of this economy in table form, in form of a system of national accounts, and in laws of motion form, and will furthermore discuss the contents of the obtained laws of motion on their intensive form level to some extent. Presenting the system from these various perspectives serves again the purpose of making the reader acquainted with the notation and the relationships that apply on the intensive form level of the model. We hope that this increases the readability of the laws of motion for quantities (including rates of growth), for prices (including wages, asset prices, and expectations), financial asset accumulation and feedback fiscal and monetary policy rules presented and discussed in section 3 of chapter 8.
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References
This chapter is based on the material presented in Chiarella, Flaschel, Groh, Köper and Semmler (1999b) .
In the case of problems in understanding the notations used and the contents they represents the reader should therefore go back to the original presentation of the model in chapter 7.
Or fixprice bonds, which are perfectly liquid, while the other type of bonds: long-term bonds (here consols or perpetuities, held by asset holders) cannot be liquidated at a given price from the viewpoint of the sector of asset holders as a whole.
Their purpose is to finance government expenditures with no explicit reserve requirements.
The fifth agent, the foreign economy, is represented by the balance of payments at the end of this subsection and is confined to steady state behavior in the present form of the model. All demands of this foreign sector are indexed by *, while its supply of long-term bonds B 2 to domestic residents is indexed here by 2.
There is however a tax on the imports made by the firms.
They are thus not perfectly liquid, since there is no ‘money back’ guarantee here for the sector of asset owners as a whole.
Note here that all demand and supply considerations of firms depend directly or indirectly, via the world market prices in terms of the domestic currency, on the nominal exchange rate which thus is also involved in the steady state calculations of the next section, see also Powell and Murphy (1997, p.169) in this regard.
This simplification may be justified by the observation that the assumption of only two polar types of heterogeneous agents suggests this further discrimination between their typical attitudes.
Their complicated composition of wealth does then not influence aggregate demand and the equilibrium to be derived for the market for goods below.
Note here that we neglect as alternative steady state positions all zeros which can be obtained mathematically from the growth law formulations that our model employs. Note also again that the steady state depends parametrically on the initial conditions for (Math) that characterize the initial composition of the labor force, the initial output price level (including value added taxes) and a relative expression for the consumption of asset owners.
Note here that we neglect as alternative steady state positions all zeros which can be obtained mathematically from the growth law formulations that our model employs. Note also the steady state depends parametrically on the initial conditions for (Math) that characterize the initial composition of the labor force.
Whose complicated composition of wealth does then not influence aggregate demand and the equilibrium to be derived for the market for goods below.
Note that because of these assumptions the optimization problem faced by demand and supply constrained firms becomes degenerate.
Note that the second and third of the following conditions arise by solving the firms’ unconstrained optimization problem in the current context.
See also Powell and Murphy (1997) for a detailed presentation of such a production block for the economy.
Powell and Murphy (1997) indeed find for the steady state of their applied model that Ū c < 1 holds true, as can be seen from their p.220 when their price formulae are expressed in terms of quantities as described in chapter 7 of this book.
As long as no extrinsic, behavioral and technological relationships are assumed to supplement the model far off the steady state.
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© 2000 Springer-Verlag Berlin Heidelberg
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Chiarella, C., Flaschel, P., Groh, G., Semmler, W. (2000). Intensive Forms and Steady State Calculations. In: Disequilibrium, Growth and Labor Market Dynamics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-04070-6_8
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DOI: https://doi.org/10.1007/978-3-662-04070-6_8
Publisher Name: Springer, Berlin, Heidelberg
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