Towards Applied Disequilibrium Growth Theory: II Intensive Form and Steady State Analysis of the Model

In this paper we investigate further the 34D applied structural model whose extensive form we introduced in Chiarella and Flaschel (1999c). Here we express the model in terms of intensive form state variables, thereby abstracting from the underlying growth trend. We explain the dynamic (and static) laws of the model directly in terms of the intensive form variables, and then determine the steady state and its characteristics. Finally we show how a small number of simplifying assumptions, concerning in particular consumption of asset holders and some secondary adjustment processes, reduce the 34D model to an 18D core model. It is this latter core model whose detailed structure, steady state characteristics and dynamical behavior will become the object of study in the remaining papers of this sequence.