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Estimation and Identification of Structural Parameters in the Presence of Multiple Equilibria

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  • Russell W. Cooper

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    (Department of Economics, University of Texas at Austin)

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    Abstract

    This paper studies quantitative implications of model economies that exhibit multiple equilibria. The goal is to assess two interrelated issues. First, do economies with multiple equilibria have falsifiable predictions? Second, is the identification of structural parameters possible in economies that exhibit multiple equilibria? We raise these questions within a general framework and then study a series of examples to determine how the existing literature has addressed them. These examples illustrate cases in which parameters can be identified and models falsified.

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    File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume31/V31N1P107_130.pdf
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    Bibliographic Info

    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 31 (2005)
    Issue (Month): 1 (Winter)
    Pages: 107-130

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    Handle: RePEc:eej:eeconj:v:31:y:2005:i:1:p:107-130

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    Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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    References

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    1. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Russell Cooper & Joao Ejarque, 1994. "Financial Intermediation and Aggregate Fluctuations: A Quantative Analysis," NBER Working Papers 4819, National Bureau of Economic Research, Inc.
    3. Carlsson, H. & Damme, E.E.C. van, 1993. "Global games and equilibrium selection," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154416, Tilburg University.
    4. Farmer, Roger E. A. & Jang-Ting, Guo, 1995. "The econometrics of indeterminacy: an applied study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 225-271, December.
    5. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
    6. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
    7. repec:cup:macdyn:v:4:y:2000:i:4:p:423-47 is not listed on IDEAS
    8. Azariadis, Costas & Guesnerie, Roger, 1986. "Sunspots and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 725-37, October.
    9. Weil, Philippe, 1989. "Increasing Returns and Animal Spirits," American Economic Review, American Economic Association, vol. 79(4), pages 889-94, September.
    10. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
    11. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
    12. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967, April.
    13. S. Rao Aiyagari, 1995. "Comments on Farmer and Guo's "the econometrics of indeterminacy: an applied study."," Staff Report 196, Federal Reserve Bank of Minneapolis.
    14. Farmer Roger E. A. & Guo Jang-Ting, 1994. "Real Business Cycles and the Animal Spirits Hypothesis," Journal of Economic Theory, Elsevier, vol. 63(1), pages 42-72, June.
    15. Kamihigashi, Takashi, 1996. "Real business cycles and sunspot fluctuations are observationally equivalent," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 105-117, February.
    16. Cooper, Russell & Haltiwanger, John, 1993. "Automobiles and the National Industrial Recovery Act: Evidence on Industry Complementarities," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1043-71, November.
    17. Bryant, John, 1983. "A Simple Rational Expectations Keynes-Type Model," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 525-28, August.
    18. Moro,A. & Norman,P., 2001. "A general equilibrium model of statistical discrimination," Working papers 4, Wisconsin Madison - Social Systems.
    19. Cooper, Russell & Corbae, Dean, 2002. "Financial Collapse: A Lesson from the Great Depression," Journal of Economic Theory, Elsevier, vol. 107(2), pages 159-190, December.
    20. Ingram, Beth Fisher & Kocherlakota, Narayana R. & Savin, N. E., 1994. "Explaining business cycles: A multiple-shock approach," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 415-428, December.
    21. Andrea Moro, 2003. "The Effect Of Statistical Discrimination On Black-White Wage Inequality: Estimating A Model With Multiple Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 467-500, 05.
    22. Bresnahan, Timothy F. & Reiss, Peter C., 1991. "Empirical models of discrete games," Journal of Econometrics, Elsevier, vol. 48(1-2), pages 57-81.
    23. Woodford, Michael, 1987. "Three Questions about Sunspot Equilibria as an Explanation of Economic Fluctuations," American Economic Review, American Economic Association, vol. 77(2), pages 93-98, May.
    24. Alberto Bisin & Andrea Moro & Giorgio Topa, 2006. "The Empirical Content of Models with Multiple Equilibria," 2006 Meeting Papers 660, Society for Economic Dynamics.
    25. repec:att:wimass:9127 is not listed on IDEAS
    26. Cooper, Russell & Ejarque, Jo o, 2000. "Financial Intermediation And Aggregate Fluctuations: A Quantitative Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 4(04), pages 423-447, December.
    27. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
    28. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
    29. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-40, December.
    30. Russell Cooper & Alok Johri, 1996. "Dynamic Complementarities: A Quantitative Analysis," NBER Working Papers 5691, National Bureau of Economic Research, Inc.
    31. Jovanovic, Boyan, 1989. "Observable Implications of Models with Multiple Equilibria," Econometrica, Econometric Society, vol. 57(6), pages 1431-37, November.
    32. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176, April.
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    Cited by:
    1. Julien, Ludovic A., 2011. "Unemployment equilibrium and economic policy in mixed markets," Economic Modelling, Elsevier, vol. 28(4), pages 1931-1940, July.

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