Coordination on saddle-path solutions: the eductive viewpoint--linear multivariate models - Archive ouverte HAL Access content directly
Journal Articles Journal of Economic Theory Year : 2005

Coordination on saddle-path solutions: the eductive viewpoint--linear multivariate models

(1, 2) , (3)
1
2
3

Abstract

We examine local strong rationality (LSR) in multivariate models with both forward-looking expectations and predetermined variables. Given hypothetical common knowledge restrictions that the dynamics will be close to those of a specified minimal state variable solution, we obtain eductive stability conditions for the solution to be LSR. In the saddlepoint stable case the saddle-path solution is LSR provided the model is structurally homogeneous across agents. However, the eductive stability conditions are strictly more demanding when heterogeneity is present, as can be expected in multisectoral models. Heterogeneity is thus a potentially important source of instability even in the saddlepoint stable case.

Dates and versions

halshs-00754056 , version 1 (20-11-2012)

Identifiers

Cite

Roger Guesnerie, George W. Evans. Coordination on saddle-path solutions: the eductive viewpoint--linear multivariate models. Journal of Economic Theory, 2005, 124 (2), pp.202-229. ⟨10.1016/j.jet.2004.06.010⟩. ⟨halshs-00754056⟩
121 View
0 Download

Altmetric

Share

Gmail Facebook Twitter LinkedIn More