ADJUSTMENT COSTS AND INDETERMINACY IN PERFECT FORESIGHT MODELS

Authors
GEORGES C
Citation
C. Georges, ADJUSTMENT COSTS AND INDETERMINACY IN PERFECT FORESIGHT MODELS, Journal of economic dynamics & control, 19(1-2), 1995, pp. 39-50
Citations number
14
Categorie Soggetti
Economics
Journal title
Journal of economic dynamics & control → ACNP
ISSN journal
01651889
Volume
19
Issue
1-2
Year of publication
1995
Pages
39 - 50
Database
ISI
SICI code
0165-1889(1995)19:1-2<39:ACAIIP>2.0.ZU;2-B
Abstract
This paper suggests a method for resolving indeterminacy of equilibriu m in perfect foresight models and applies it to several existing model s. Quadratic adjustments costs are introduced into models with multipl e equilibria, and the limiting behavior of the resulting solutions is studied as the adjustment costs go to zero. The method is shown to be useful in selecting among feasible equilibria in examples in which the re is local indeterminacy.