David Stockman () (Department of Economics,University of Delaware) Judy Kennedy () (Department of Mathematics,University of Delaware) James Yorke (Institute for Physical Science and Technology, University of Maryland)
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Some economic models like the cash-in-advance model of money have the property that the dynamical system characterizing equilibria is multi-valued going forward in time, but single-valued going backward in time, i.e., the model has backward dynamics. In this paper, we apply the theory of inverse limits to characterize topologically the set of equilibria in a dynamic economic model with this property. We show that such techniques are particularly well-suited for analyzing the dynamics going forward in time even though the dynamics are multi-valued in this direction. In particular, we analyze the inverse limit of the cash-in-advance model of money and illustrate how information about the inverse limit is useful for detecting or ruling out complicated dynamics.
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Publisher Info
Paper provided by University of Delaware, Department of Economics in its series Working Papers with number
06-12.
Length: 38 pages Date of creation: 2006 Date of revision: Publication status: Forthcoming in Topology and Its Applications. Handle: RePEc:dlw:wpaper:06-12
Find related papers by JEL classification: C6 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
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