Econometrica: Oct 1959, Volume 27, Issue 4
A Note on Some Stability Properties of Leontief's Dynamic Models
Zivia S. WurteleThe Leontief dynamic model of the economy is frequently criticized for its lack of stability: outputs increase indefinitely with time, although final demand remains constant. If the time required for the adjustment of the stock of capital goods to the rate of output is greater than a theoretically determined minimum period, it is shown that a Leontief dynamic model based on backward difference equations is stable. The question is raised and answered as to whether difference or differential equations provide a better representation of a Leontief-type system.
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