Coordination on saddle path solutions: the eductive viewpoint

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Coordination on saddle path solutions: the eductive viewpoint

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George W. Evans () (University of Oregon Economics Department)
Roger Guesnerie ("DELTA, E.N.S.")

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Abstract

We 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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Publisher Info
Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2001-7.

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Length: 26
Date of creation: 01 Sep 1999
Date of revision: 15 May 2001
Handle: RePEc:ore:uoecwp:2001-7

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G. Desgranges & G. Negroni, 2001. "Expectations Coordination on a Sunspot Equilibrium: an Eductive Approach," THEMA Working Papers 2001-13, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
Other versions:
- Desgranges, Gabriel & Negroni, Giorgio, 2003. "Expectations Coordination On A Sunspot Equilibrium: An Eductive Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 7(01), pages 7-41, February. [Downloadable!]
Orlando Gomes, . "Volatility, Heterogeneous Agents and Chaos," The Electronic Journal of Evolutionary Modeling and Economic Dynamics, IFReDE - Université Montesquieu Bordeaux IV. [Downloadable!]
Other versions:
- Orlando Gomes, 2004. "Volatility, Heterogeneous Agents and Chaos," GE, Growth, Math methods 0409010, EconWPA. [Downloadable!]
George W. Evans & Roger Guesnerie, 2003. "Coordination on Saddle-Path Solutions: The Eductive Viewpoint -- Linear Multivariate Models," University of Oregon Economics Department Working Papers 2003-28, University of Oregon Economics Department, revised 25 Jan 2005. [Downloadable!]
Other versions:
- George W. Evans & Roger Guesnerie, 2003. "Coordination on Saddle-Path Solutions: the Eductive Viewpoint - Linear Multivariate Models," DELTA Working Papers 2003-28, DELTA (Ecole normale supérieure). [Downloadable!]
- Evans, George W. & Guesnerie, Roger, 2005. "Coordination on saddle-path solutions: the eductive viewpoint--linear multivariate models," Journal of Economic Theory, Elsevier, vol. 124(2), pages 202-229, October. [Downloadable!] (restricted)
Roger Guesnerie, 2008. "Macroeconomic and monetary policies from the "eductive" viewpoint," PSE Working Papers 2008-24, PSE (Ecole normale supérieure). [Downloadable!]
Other versions:
- Roger Guesnerie, 2008. "Macroeconomic And Monetary Policies From The Eductive Viewpoint," Working Papers Central Bank of Chile 498, Central Bank of Chile. [Downloadable!]
Seppo Honkapohja & Kaushik Mitra, 2006. "Learning Stability in Economies with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 284-309, April. [Downloadable!] (restricted)
Other versions:
- Kaushik Mitra & Seppo Honkapohja, 2004. "Learning Stability in Economies with Heterogenous Agents," Royal Holloway, University of London: Discussion Papers in Economics 04/17, Department of Economics, Royal Holloway University of London, revised Jul 2004. [Downloadable!]
- Seppo Honkapohja & Kaushik Mitra, 2002. "Learning stability in economics with heterogenous agents," Working Paper Series 120, European Central Bank. [Downloadable!]
- Honkapohja, Seppo & Mitra, Kaushik, 2002. "Learning Stability in Economies with Heterogenous Agents," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Bennett T. McCallum, 2006. "E-Stability vis-a-vis Determinacy Results for a Broad Class of Linear Rational Expectations Models," NBER Working Papers 12441, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- McCallum, Bennett T., 2007. "E-stability vis-a-vis determinacy results for a broad class of linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1376-1391, April. [Downloadable!] (restricted)

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