Coordination On Saddle-Path Solutions: The Eductive Viewpoint Linear Univariate Models
AbstractWe investigate local strong rationality (LSR) in a one-step-forward-looking univariate model with memory one. Eductive arguments are used to determine when common knowledge (CK) that the solution is near some perfect-foresight path is sufficient to trigger complete coordination on that path (i.e., the path is LSR). Coordination of expectations is shown to depend on three factors: the nature of the CK initial beliefs, the degree of structural heterogeneity, and the information structure. Our sufficient conditions for LSR precisely reflect these features and provide basic consistent justifications for the choice of the saddle-path solution.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 7 (2003)
Issue (Month): 01 (February)
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Other versions of this item:
- Evans, G.E. & Guesnerie, R., 1999. "Coordination on Saddle Path Solutions: the Eductive Viewpoint. 1- Linear Univariate Models," Papers 1999-15, Laval - Laboratoire Econometrie.
- Evans, G. E. & Guesnerie R., 1999. "Coordination on saddle path solutions : the eductive viewpoint. 1 - linear univariate models," DELTA Working Papers 1999-15, DELTA (Ecole normale supérieure).
- C00 - Mathematical and Quantitative Methods - - General - - - General
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
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- Richard Dennis & Tatiana Kirsanova, 2013.
"Expectations Traps and Coordination Failures with Discretionary Policymaking,"
ANU Working Papers in Economics and Econometrics
2013-611, Australian National University, College of Business and Economics, School of Economics.
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- Richard Dennis & Tatiana Kirsanova, 2010.
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CAMA Working Papers
2010-02, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Richard Dennis & Tatiana Kirsanova, 2010. "Expectations traps and coordination failures: selecting among multiple discretionary equilibria," Working Paper Series 2010-02, Federal Reserve Bank of San Francisco.
- Dennis, Richard & Kirsanova, Tatiana, 2010. "Expectations Traps and Coordination Failures: Selecting among Multiple Discretionary Equilibria," MPRA Paper 24616, University Library of Munich, Germany.
- Haomiao Yu, 2014. "Rationalizability in large games," Economic Theory, Springer, vol. 55(2), pages 457-479, February.
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