A stock-flow approach to general equilibrium with trade frictions

摘要

A dynamic model framework is outlined in which demand and supply are not assumed to match instantaneously. The formalism allows for a wide range of transaction processes and price mechanisms with accompanying externalities and spillovers. The framework comprises both flow variables, such as trade and consumption, and stock variables, such as assets, buffer stocks, and backlog orders. A notion of equilibrium is suggested, and sufficient conditions are given for its existence. The short-side rule and Walrasian equilibrium are identified as limiting cases.