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Dynamics of temporary equilibria and expectations

Fuchs, G.; Laroque, G.; (1976) Dynamics of temporary equilibria and expectations. Econometrica , 44 (6) pp. 1157-1178.

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This paper is devoted to the analysis of the dynamic behavior of a sequence of temporary equilibria. The model chosen is a generalization of Samuelson's pure consumption loan model as introduced by J. M. Grandmont and G. Laroque in [5]. Three main results are given. First there is an open and dense subset U of economies for which, near stationary equilibria and cycles, the dynamics take the standard form of an ordinary difference equation. Then conditions are obtained so that, for an economy E in U, stationary equilibria are locally asymptotically stable; these conditions are discussed in the case where there is only one good in addition to money. Last, it is proven that the qualitative behavior of trajectories of E near stationary equilibria and cycles is preserved under small perturbations; i.e., one has a property of local structural stability; this is true in particular with respect to changes in the individual expectations of the agents.

Title:Dynamics of temporary equilibria and expectations
Publisher version:http://www3.interscience.wiley.com/journal/118482539/home
Additional information:This issue is available via JSTOR subscription: http://www.jstor.org/stable/1914253
UCL classification:UCL > School of Arts and Social Sciences > Faculty of Social and Historical Sciences > Economics

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