Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 837: Error Corrected Disequilibrium

Ulf Holmberg ()
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Ulf Holmberg: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

Abstract: We derive an econometric disequilibrium model for time series data. This is done by error correcting the supply of some good. The model naturally separates between a continuously clearing market and a clearing market in the long-run such that we are able to obtain a novel test of clearing markets. We apply the model to the Swedish market for short-term business loans, and find that this market is characterized by a long-run non-market clearing equilibrium.

Keywords: disequilibrium econometrics; error correction; clearing market; interest rates; credit market

JEL-codes: C12; C13; C51; D53; E43

15 pages, February 17, 2012

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