Introduction

In this chapter we continue the analysis of our applied structural model of disequilibrium growth initiated in Chiarella and Flaschel (1999b,c,d). In those earlier papers we developed a model of disequilibrium growth which is fairly complete with respect to markets, agents and sectors and consistent with respect to the various budget constraints between them. We showed in Chiarella and Flaschel (1999b,c,d) that the model could be expressed as a dynamical system of 34D intensive state variables together with a number of static relationships. We further showed how a small number of not unreasonable simplifying assumptions reduced this dynamical system to one of eighteen laws of motion solely, which we have dubbed the core model of this approach with fixed proportions in production. Our aim in this, and in the next two chapters, is to analyse in quite some detail the properties of this 18D core model. In this chapter in particular we focus on the basic partial feedback structures of the core model and their stability characteristics.

We can distinguish qualitatively at least seven important feedback chains (plus stabilising or destabilising policy reaction functions), which we will describe below in isolation from each other. These will of course interact with each other in the full 18D dynamics of the core model, so that one or another may become dominant when the parameters of the model are chosen appropriately.

The structure of the chapter is as follows: Section 7.2 describes the accounts of the various agents of our modelling framework.