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A 2007 run on Northern Rock, a British bank. The Diamond–Dybvig model is an influential model of bank runs and related financial crises.The model shows how banks' mix of illiquid assets (such as business or mortgage loans) and liquid liabilities (deposits which may be withdrawn at any time) may give rise to self-fulfilling panics among depositors.
In mathematical economics, the Arrow–Debreu model is a theoretical general equilibrium model. It posits that under certain economic assumptions ( convex preferences , perfect competition , and demand independence), there must be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy.
Partial equilibrium, the equilibrium price and quantity which come from the cross of supply and demand in a competitive market; Radner equilibrium, an economic concept defined by economist Roy Radner in the context of general equilibrium; Recursive competitive equilibrium, an economic equilibrium concept associated with a dynamic program
Real business-cycle theory (RBC theory) is a class of new classical macroeconomics models in which business-cycle fluctuations are accounted for by real, in contrast to nominal, shocks. [1] RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment.
Equilibrium may also be economy-wide or general, as opposed to the partial equilibrium of a single market. Equilibrium can change if there is a change in demand or supply conditions. For example, an increase in supply will disrupt the equilibrium, leading to lower prices. Eventually, a new equilibrium will be attained in most markets.
The interaction of the agents in markets cover every period of the business cycle which ultimately qualifies the "general equilibrium" aspect of this model. The preferences (objectives) of the agents in the economy must be specified. For example, households might be assumed to maximize a utility function over
General equilibrium theory contrasts with the theory of partial equilibrium, which analyzes a specific part of an economy while its other factors are held constant. [1] General equilibrium theory both studies economies using the model of equilibrium pricing and seeks to determine in which circumstances the assumptions of general equilibrium ...
The original Heckscher–Ohlin model and extended model such as the Vanek model performs poorly, as it is shown in the section "Econometric testing of H–O model theorems". Daniel Trefler and Susan Chun Zhu summarizes their paper that "It is hard to believe that factor endowments theory [editor's note: in other words, Heckscher–Ohlin–Vanek ...