Economics Letters 9 (1982) 69-75 North-Holland Publishing Company 69 zyxwvutsrqponm DISEQUILIBRIUM DYNAMICS WITH MONETARIST PRICE EXPECTATIONS Received 30 November 1981 In this note we sketch the main Ceatures of the dynamic evolution of a rationed equilibrium macroeconomic model in which prices and wages respond to excess demands and inflation expectations, and the money stock is endogenous. We postulate monetarist inflation expectations, i.e., expected inflation is assumed to be equal to the current percentage rate of change of the money stock. If the system is stable. monetarist inflation expectations arc asymptotically rational. 1. Introduction In the past ten years the so-called disequilibrium or non-Walrasian models have been the subject of a lot of research. The early work concentrated on the analysis of temporary or short-run states of the economy, when prices are assumed to be rigid in the time interval considered, and overall consistency in the economy is achieved as an equilibrium with quantity rationing. [See, for example, Barro and Gross- man (1976, ch. 2), and Malinvaud (1977) or the survey by Drazen (1980).] Beyond the very short run the postulate of fixed prices is, of course, highly questionable to say the least. Recently attempts have been made to analyze the dynamic evolution of these temporary rationing equilibria * NSF Grant SES x0-06473 is gratefully acknowledged. 0165-1765/82/0000-0000/$02.75 0 1982 North-Holland