Disequilibrium Model Research Articles

External Shocks, Asset Prices, and Credit Dynamics in Morocco: Insights from Disequilibrium Models

We investigate external shocks and asset price’s impact on the slowdown of business and household credit in Morocco using disequilibrium models. The results show that banks’ fly to quality, driven by a simultaneous decline in interest margins and borrower creditworthiness, is a key factor behind the slowdown of credit supply. On the demand side, slower growth and saturated housing demand have contributed to reduced borrowing and repayment capacity of borrowers. Furthermore, external shocks are transmitted to credit supply through foreign deposits and households’ credit demand through remittances. Additionally, stocks and residential real estate asset prices are closely tied to credit demand. These findings suggest that addressing bank credit barriers could stimulate economic growth. To do so, policymakers may consider employing unconventional monetary policy tools to effectively manage the transmission channels of external shocks and asset prices to bank credit dynamics.

Recent research on response disequilibrium theory: A concise review.

A resurgence in research on response disequilibrium theory has prompted a concise review of the literature from the past 5 years. Response disequilibrium, also known as response deprivation, attributes reinforcement and punishment effects to constraints on free-operant baseline levels of behavior. By describing clinically relevant behaviors in terms of instrumental and contingent activities, researchers and practitioners can predict intervention outcomes with a disequilibrium model. We summarize the empirical outcomes of disequilibrium-informed interventions across six articles and discuss areas of future research.

Monetary Policy and Income Distribution in a Multisectoral AB-SFC Model

ABSTRACT Restrictive monetary policy can not only fail to achieve the conventional macroeconomic goal of controlling inflation but also be seen as responsible for the increasing income inequality that has occurred in recent decades. This result is not clear, however, if one remains bounded to the traditional monetary policy transmission mechanisms and conventional models. In this article, we create an agent-based, stock-flow consistent, heterodox disequilibrium model to analyse and evaluate the effects of different basic interest rate levels, especially its distributive effects. Using computer simulations, we show that the basic interest rate plays a key role when firms compete in oligopolistic markets and face financial constraints and costs. In such circumstances, increases in the interest rate can be responsible for price increases, creating the price puzzle problem. In addition, it forces redistribution of income in favour of the financial system and pressures the profit rate of industrial firms, which will raise prices and lower the wage share. The final distributive effect of an interest rate policy will ultimately depend on the power of these agents: the bargaining power of the workers to claim higher wages and the market power of the firms to raise prices.

SharePro: an accurate and efficient genetic colocalization method accounting for multiple causal signals.

Colocalization analysis is commonly used to assess whether two or more traits share the same genetic signals identified in genome-wide association studies (GWAS), and is important for prioritizing targets for functional follow-up of GWAS results. Existing colocalization methods can have suboptimal performance when there are multiple causal variants in one genomic locus. We propose SharePro to extend the COLOC framework for colocalization analysis. SharePro integrates linkage disequilibrium (LD) modeling and colocalization assessment by grouping correlated variants into effect groups. With an efficient variational inference algorithm, posterior colocalization probabilities can be accurately estimated. In simulation studies, SharePro demonstrated increased power with a well-controlled false positive rate at a low computational cost. Compared to existing methods, SharePro provided stronger and more consistent colocalization evidence for known lipid-lowering drug target proteins and their corresponding lipid traits. Through an additional challenging case of the colocalization analysis of the circulating abundance of R-spondin 3 GWAS and estimated bone mineral density GWAS, we demonstrated the utility of SharePro in identifying biologically plausible colocalized signals. SharePro for colocalization analysis is written in Python and openly available at https://github.com/zhwm/SharePro_coloc.

Green transition and macroeconomic stabilization

This paper looks into the crucial macroeconomic feedback mechanisms emerging from the interplay among the goods market, the labor market, the financial sector, and monetary policy, particularly in the context of transitioning towards a climate-neutral economy. The investment decisions of firms, pivotal in this interaction, can trigger feedback loops with potentially destabilizing effects, underscoring the critical role of investment within the complex interplay of market and sector dynamics in the macroeconomy. Governmental intervention is highlighted as a key factor in steering the green transition while preserving economic stability. A carbon tax on fossil fuel consumption is proposed as a primary tool for facilitating this green transition. Our investigation employs a disequilibrium model of monetary growth, a la Keynes-Metzler-Goodwin (KMG), incorporating a portfolio perspective across three asset markets - money, bonds, and stocks. This framework allows for an in-depth analysis of how a carbon tax influences real production, inflation, and inequality during the transition. Our findings indicate that imposing a carbon tax on production does not markedly disrupt economic stability, as long as the carbon pricing and its growth rate remain within low bounds.

TEMPORARY DISEQUILIBRIUM OF A PURE CASH ECONOMY

A Classical theoretical model of temporary disequilibrium in a pure cash monetary system is formulated, in which each capitalist aims to maximize accumulation in her/his own sector, and prices and allocations are determined by the Cantillon rule. The dynamics generated by this economy are those of a sequence of temporary disequilibria, which are shown to be locally and globally unstable. Thus, government intervention is justified to avoid an economic crisis. The paper concludes by recommending an extension of the model considering alternative monetary systems.

Credit Crunch and Monetary Policy During Covid-19 Pandemic

Under crisis conditions, the significant decline in bank credit growth is associated with the credit crunch phenomenon. The ability of the banking system to provide credit in the economy is limited compared to the demand for credit. During the Covid-19 pandemic, credit growth in Indonesia reached its lowest point when compared to the pre-Covid-19 period. However, the causative factor is still ambiguous. Using a credit market disequilibrium model estimated with Maximum Likelihood, this study tested whether the decline in credit during the Covid-19 pandemic was a credit crunch phenomenon. The results of this study show that the parameter of the probability of credit decline during the Covid-19 pandemic is an insignificant credit crunch phenomenon. This means that the estimated demand for credit is less than the excess supply. Thus, the implications for the role of monetary policy by lowering interest rates have been hampered due to the decline in economic activity during the Covid-19 pandemic.

János Kornai on planning and disequilibrium: Theoretical dilemmas and solutions

AbstractJános Kornai has achieved a wide-scope multifaceted theoretical analysis moving from Marx to Walras-Lange, then to post-Keynesian disequilibrium economics, and eventually, to Hayek and economic institutionalism. Such a travel is not without meeting dilemmas that Kornai has had to struggle with and opt to resolve them in some way. Such process is illustrated first with a planner's dilemma. On the one hand, Kornai has elaborated on – together with Tamás Lipták – a mathematically ‘super’ solution to finding the optimal plan through a two-level planning procedure. But once implemented the latter has appeared to be too slow, and Kornai has rejected Lange's ideas for Hayek's criticism against central planning. A second dilemma is about how to analyse a centrally-planned shortage (excess demand) economy in which those industries privileged in the planners' pecking order priorities were producing an excess supply of (useless) goods. Kornai did not find a solution in the current disequilibrium economics but, instead, in a ‘lax’ communist bureaucracy generating a soft budget constraint. The third dilemma is that Kornai's views about disequilibria have not converged with the Post-Keynesian disequilibrium models. The latter were unable to conceive a simultaneous excess demand and excess supply in a same market, due to their so-called shorter-side rule. Instead, Kornai has found a solution that fits with theorising the observed micro (or even infra-micro) disequilibria in a Debreu's book, some years after having published a hard criticism of neo-classical microeconomics. A final question is raised: is Kornai's theory a decisive contribution to the analysis of comparative economic systems – that no one denies – or has he added some value to a more general theory of economic disequilibrium?

A review of the housing market-clearing process in integrated land-use and transport models

The land-use/transport interaction (LUTI) modeling framework has become the current state of best practice for analyzing the interdependency between the land-use and transportation systems. This paper presents a comprehensive review of the housing market-clearing mechanisms used in operational LUTI models. Market clearing is a critical component of modeling housing markets, but a systematic review and critique of the current state of the art have not previously been undertaken. In the review paper, the theoretical foundations for modeling household location choice are reviewed, including bid-rent and random utility theories. Five LUTI models are discussed in detail: two equilibrium models, MUSSA and RELU-TRAN, and three dynamic disequilibrium models, UrbanSim, ILUTE, and SimMobility. The discussion focuses on the following key points: the assumptions embedded in the models, the aggregation level of households and locations, computational cost and operationalization of the models. One of the challenges is that there are rarely any empirical studies that compare the performance of equilibrium and dynamic models in the same study context. Future research is recommended to empirically investigate the pros and cons of the two modeling approaches and compare the model performances for their representativeness of real-world behavior, computational efficiencies, and abilities for policy analysis. More sophisticated studies about the impacts of agents’ behavior on the housing market-clearing process are also recommended.

Raising Interest Rates for Improving Income

Abstract This paper illustrates a case where an increase of the interest rates improves the economic activity and reduces income inequality. This theoretical exercise deals with a simple model of disequilibrium with accountant identities of budget constraints. In addition, and following previous models, the effect of the COVID-19 shock is considered, by reflecting asymmetric repercussions that increase income inequality. A simple empirical exercise confirms some of the previous results. The proposed explanation is that, for the euro area, this shock has affected more middle-income households such as the retailers harmed by the compulsory lockdown who have increased their debts.

Extremely sparse models of linkage disequilibrium in ancestrally diverse association studies.

Linkage disequilibrium (LD) is the correlation among nearby genetic variants. In genetic association studies, LD is often modeled using large correlation matrices, but this approach is inefficient, especially in ancestrally diverse studies. In the present study, we introduce LD graphical models (LDGMs), which are an extremely sparse and efficient representation of LD. LDGMs are derived from genome-wide genealogies; statistical relationships among alleles in the LDGM correspond to genealogical relationships among haplotypes. We published LDGMs and ancestry-specific LDGM precision matrices for 18 million common variants (minor allele frequency >1%) in five ancestry groups, validated their accuracy and demonstrated order-of-magnitude improvements in runtime for commonly used LD matrix computations. We implemented an extremely fast multiancestry polygenic prediction method, BLUPx-ldgm, which performs better than a similar method based on the reference LD correlation matrix. LDGMs will enable sophisticated methods that scale to ancestrally diverse genetic association data across millions of variants and individuals.

Disentangling demand and supply side determinants of post-GFC credit slowdown: an Indian perspective.

In an emerging market economy (EME) that depends largely on bank-credit, it is important to decipher whether supply-side or demand-side factors are responsible for a sluggish credit growth phase. A formal empirical analysis using Indian data and a disequilibrium model suggests that demand side factors have majorly contributed to the credit slowdown during the post-GFC period and prior to the pandemic. This could be because of adequate supply of funds, and several concerted policy actions taken by the regulatory authorities to mitigate concerns over the asset quality risks. In contrast, lower investment demand and global supply side bottlenecks have often contributed to demand side weaknesses, suggesting the need for strong policy support to uphold credit demand.

Modelling of two-phase expansion in a reciprocating expander

Two-phase expansion devices can be applied in a multitude of cycles which allow for an increase of the overall system efficiency in currently used heat and power cycles. The expanders that are mainly investigated for the purpose of two-phase expansion are the Lysholm and the reciprocating expanders. From these two, the reciprocating expander is challenging to model as there is a need to describe the non-equilibrium state of the phases during the expansion process. This study aims to fill the knowledge gap that exists for two-phase reciprocating expanders, by constructing a predictive model to describe the expansion process and the non-equilibrium phenomena occurring. The simulation framework makes use of a modified homogeneous relaxation model to describe the thermal non-equilibrium between the phases within the isolated working chamber. The model results are verified and compared to experimental data in literature with water as working fluid. Subsequently, Cyclopentane is selected as a more suitable candidate and a thorough analysis is presented. The simulation results predict a 15% lower work and a 10% higher mass intake per stroke of the expander compared to equilibrium working conditions. • A model is constructed to predict the evaporation rate of a two-phase mixture in a reciprocating expander. • The homogeneous relaxation model is applied and compared to the homogeneous equilibrium model. • The evaporation rate in a reciprocating expander is lower than expected, resulting in metastable conditions during the process. • The updated disequilibrium model predicts around 25% more mass intake and 8% lower work compared to the equilibrium model.

On expenditure/income discrepancies in national accounts in the presence of two price units

This paper demonstrates that expenditure/income discrepancies appearing in national accounts are caused partly by the nominal distortion due to the presence of two price units, and partly by the real distortion due to the mismeasurement of expenditure items. In addition, it investigates how such statistical discrepancies reveal potentially important information about various informal, though not necessarily illegal, economic activities, which are not grasped fully by statistical or tax authorities in a central government. Three cases are explored in detail. First, after-consumption-tax prices are mixed with before-consumption-tax prices in aggregating expenditures. Second, black-market prices coexist with official prices in a heavily controlled economy. Third, prices are quoted in not only a conventional currency unit, but also a more valuable cryptocurrency unit; however, the latter unit is still evaluated one to one with the former. Unlike in macroeconomic disequilibrium models, statistical discrepancies are not ex ante concepts, but they actually occur ex post. This paper examines how ex post excess demand/supply within the formal economy, resulting from such discrepancies, is adjusted by monetary and nonmonetary interactions with the informal or underground economy.

MONETARY AND FISCAL POLICY MIX AMID COVID-19 PANDEMICS AND THE ECONOMIC GROWTH PATH

Purpose- We focus on the recent debate on policies enhancing the economic growth and query the crucial results of the modern growth theory implying a relationship between factor substitution elasticities and sustainably perpetual growth. Our study corrects the misinterpretation that the elasticity of substitution would be an engine for perpetual growth. We query the future path of the modern growth theory, its inconsistencies and possible policy tools amid extreme events where the Covid-19 pandemic deteriorated the global supply chains and total demand in the economy. Methodology- The study employs first order ordinary differential equations method. Findings- Finally, we propose a modeling of economic disequilibrium under extreme events causing demand and supply shocks. This model shows the conditions under which the equilibrium domain for the supply and demand functions cannot be converged. As an application, our results suggest that amid Covid-19 pandemics, U.S. fiscal policy and monetary policy do not optimally match and hence the fiscal policy should be calibrated. Otherwise, the economic growth path would be hampered sooner than expected. Conclusion- Therefore, we suggest policy implications to overcome these discontinuities. We believe that the extensive approach proposed in this study will be a source for different points of view. We hope that our results shed light on future empirical studies focusing on the remedies to increase growth rate. Keywords: Elasticity of substitution, production functions, economic growth, Covid-19, extreme shocks. JEL Codes: O40, O41, O42

Banks and Economic Growth: A Basic Disequilibrium Model with Five Rationing Regimes

In this paper, an inductive research methodology and the principle of parsimony are applied to reconsider a central issue in economics and macro-finance, namely the determinants of economic growth and the role of the financial sector. A simple framework is derived, characterised by information imperfections and the absence of market clearing. The literature on rationing has identified the need to consider differing rationing regimes but has not included a banking sector. Such a set-up is presented in this paper, which identifies the link between credit and economic growth under differing rationing regimes, with varying consequences for inflation. The familiar case of money creation resulting in inflation features as a special case within the general framework. Others are the possibility of asset price bubbles and collapses, non-inflationary growth despite full employment, and instability in banking systems. The model is consistent with empirical evidence that has been difficult to reconcile with conventional equilibrium models. It is found that within this simple rationing framework, banks, left to their own devices, do not necessarily deliver stable, non-inflationary growth, and there is no reason to expect their behaviour to optimise social welfare. Some implications for research and policy are discussed.

Melting conditions and mantle source composition from probabilistic joint inversion of major and rare earth element concentrations

The chemical composition of erupted basalts provides a record of the thermo-chemical state of their source region and the melting conditions that lead to their formation. Here we present the first probabilistic inversion framework capable of inverting both trace and major element data of mafic volcanic rocks to constrain mantle potential temperature, depth of melting, and major and trace element source composition. The inversion strategy is based on the combination of (i) a two-phase multi-component reactive transport model, (ii) a thermodynamic solver for the evolution of major elements and mineral/liquid phases, (iii) a disequilibrium model of trace element partitioning and (iv) an adaptive Markov chain Monte Carlo algorithm. The mechanical and chemical evolution of melt and solid residue are therefore modelled in an internally- and thermodynamically-consistent manner.We illustrate the inversion approach and its sensitivity to relevant model parameters with a series of numerical experiments with increasing level of complexity. We show the benefits and limitations of using major and trace element compositions separately before demonstrating the advantages of a joint inversion. We show that such joint inversion has great sensitivity to mantle temperature, pressure range of melting and composition of the source, even when realistic uncertainties are assigned to both data and predictions. We further test the reliability of the approach on a real dataset from a well-characterised region: the Rio Grande Rift in western North America. We obtain estimates of mantle potential temperature (∼1340 °C), lithospheric thickness (∼60 km) and source composition that are in excellent agreement with numerous independent geochemical and geophysical estimates. In particular, this study suggests that the basalts in this region originated from a moderately hot upwelling and include the contribution from a slightly depleted source that experienced a small degree of melt or fluid metasomatism. This component is likely associated with partial melting of the lower portions of the lithosphere. The flexibility of both the melting model and inversion scheme developed here makes the approach widely applicable to assessing the thermo-chemical structure and evolution of the lithosphere-asthenosphere system and paves the way for truly joint geochemical-geophysical inversions.

The pandemic economic crisis, precautionary behavior, and mobility constraints: an application of the dynamic disequilibrium model with randomness†

This article analyzes the economic impact of the pandemic, providing insights into the consequences of alternative policies. Our framework focuses on three key features: (i) The coronavirus disease (COVID-19) is a sectoral shock of unknown depth and duration affecting some sectors and technologies more than others; (ii) there are constraints in shifting resources across sectors; and (iii) there is a high level of uncertainty about the disease and its economic aftermath, inducing a high level of precautionary behavior by some agents and leading to others facing more severe credit constraints. Because of macroeconomic externalities, precautionary behavior exacerbates the downturn, and even sectors where COVID-19 does not directly affect consumption or production may face unemployment. Multipliers associated with different government expenditure programs differ markedly. The article describes policies that can mitigate precautionary behavior, leading to reduced unemployment. Greater wage flexibility may lead to increased unemployment.

Depression Recurrence – challenges, approaches and insights from neurobiology

The significant public health burden associated with late-life depression (LLD) is magnified by the high rates of recurrence. In this session, we review what is known about recurrence risk factors, conceptualize recurrence within a model of homeostatic disequilibrium, and discuss the potential significance and challenges of new research into LLD recurrence. The proposed model is anchored in the allostatic load theory of stress. We review the allostatic response characterized by neural changes in network function and connectivity and physiological changes in the HPA axis, autonomic nervous system, immune system and circadian rhythm. We discuss the role of neural networks’ instability following treatment response as a source of downstream disequilibrium, triggering and/or amplifying abnormal stress response, cognitive dysfunction and behavioral changes, ultimately precipitating a full-blown recurrent episode of depression. We propose strategies to identify and capture early change points that signal recurrence risk through mobile technology to collect ecologically-measured symptoms, accompanied by automated algorithms that monitor for state shifts (persistent worsening) and variance shifts (increased variability) relative to a patient's baseline. Identifying such change points in relevant sensor data could potentially provide an automated tool that could alert clinicians to at-risk individuals or relevant symptom changes even in a large practice.

Further Analysis of the Response Deprivation Hypothesis: Application of the Disequilibrium Model to Novel Clinical Contexts

Behaviors are considered instrumental when they produce opportunities to engage in other activities (i.e., contingent actions). By manipulating opportunities to engage in instrumental/contingent activities, practitioners can alter the direction and magnitude of instrumental behavior using principles of disequilibrium theory. Though previously unexplored, these models may have utility in clinical contexts involving automatically maintained behavior. In the current study, we sought to provide a brief demonstration of the potential generality and applicability of this model to clinical contexts involving automatic behavior, schedule thinning, and novel response dimensions.