A theorem on expectations and the stability of equilibrium

Citation
C. Enthoven, Alain et J. Arrow, Kenneth, A theorem on expectations and the stability of equilibrium , Econometrica , 24(3), 1956, pp. 288-293
Journal title
ISSN journal
00129682
Volume
24
Issue
3
Year of publication
1956
Pages
288 - 293
Database
ACNP
SICI code
Abstract
The relationship between extrapolative expectations and dynamic stability is studied in the context of a multiple market system. Metzler's theorem on the Hicksian stability conditions is extended to include a simple expectations function. It is shown that a stable dynamic system can absorb the effects of some extrapolation of price movements and remain stable.