A continuum of path-dependent equilibrium solutions induced by sticky expectations

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F68407700%3A21110%2F23%3A00382023" target="_blank" >RIV/68407700:21110/23:00382023 - isvavai.cz</a>

Výsledek na webu

<a href="https://doi.org/10.21136/AM.2023.0229-22" target="_blank" >https://doi.org/10.21136/AM.2023.0229-22</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.21136/AM.2023.0229-22" target="_blank" >10.21136/AM.2023.0229-22</a>

Jazyk výsledku

angličtina

Název v původním jazyce

A continuum of path-dependent equilibrium solutions induced by sticky expectations

Popis výsledku v původním jazyce

We analyze a simple macroeconomic model where rational inflation expectations are replaced by a boundedly rational, and genuinely sticky, response to changes in the actual inflation rate. The stickiness is introduced in a novel way using a mathematical operator that is amenable to rigorous analysis. We prove that, when exogenous noise is absent from the system, the unique equilibrium of the rational expectations model is replaced by an entire line segment of possible equilibria with the one chosen depending, in a deterministic way, upon the previous states of the system. The agents are sufficiently far-removed from the rational expectations paradigm that problems of indeterminacy do not arise. The response to exogenous noise is far more subtle than in a unique equilibrium model. After sufficiently small shocks the system will indeed revert to the same equilibrium but larger ones will move the system to a different one (at the same model parameters). The path to this new equilibrium may be very long with a highly unpredictable endpoint. At certain model parameters exogenously-triggered runaway inflation can occur.

Název v anglickém jazyce

A continuum of path-dependent equilibrium solutions induced by sticky expectations

Popis výsledku anglicky

We analyze a simple macroeconomic model where rational inflation expectations are replaced by a boundedly rational, and genuinely sticky, response to changes in the actual inflation rate. The stickiness is introduced in a novel way using a mathematical operator that is amenable to rigorous analysis. We prove that, when exogenous noise is absent from the system, the unique equilibrium of the rational expectations model is replaced by an entire line segment of possible equilibria with the one chosen depending, in a deterministic way, upon the previous states of the system. The agents are sufficiently far-removed from the rational expectations paradigm that problems of indeterminacy do not arise. The response to exogenous noise is far more subtle than in a unique equilibrium model. After sufficiently small shocks the system will indeed revert to the same equilibrium but larger ones will move the system to a different one (at the same model parameters). The path to this new equilibrium may be very long with a highly unpredictable endpoint. At certain model parameters exogenously-triggered runaway inflation can occur.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

10102 - Applied mathematics

Projekt

<a href="/cs/project/GA20-14736S" target="_blank" >GA20-14736S: Modelování hystereze v matematickém inženýrství</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2023

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Applications of mathematics

ISSN

0862-7940

e-ISSN

1572-9109

Svazek periodika

68

Číslo periodika v rámci svazku

6

Stát vydavatele periodika

CZ - Česká republika

Počet stran výsledku

43

Strana od-do

751-793

Kód UT WoS článku

001107925400002

EID výsledku v databázi Scopus

2-s2.0-85177634432