Econometrica: Nov, 1974, Volume 42, Issue 6

Short-Run Equilibrium and Stability in the Two-Sector Growth Model

https://doi.org/0012-9682(197411)42:6<1081:SEASIT>2.0.CO;2-M
p. 1081-1092

Miltiades Chacholiades

This paper demonstrates how the short-run static stability conditions of the two-sector growth model can be derived by converting the problem into a two-person, two-good exchange model. It is shown that the only necessary and sufficient condition for short-run stability is the Marshall-Lerner condition, and that the Drandakis (sufficient) condition follows easily from the former.