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The E‐Correspondence Principle

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  • GEORGE W. EVANS
  • SEPPO HONKAPOHJA

Abstract

We present a new application of Samuelson's Correspondence Principle to the analysis of comparative dynamics in stochastic rational expectations models. Our version, which we call the E‐correspondence principle, applies to rational expectations equilibria that are stable under least squares and closely related learning rules. With this technique it is sometimes possible to study, without explicitly solving for the equilibrium, how qualitative properties of the equilibrium are affected by changes in the model parameters. Applications to overlapping generations and New Keynesian models illustrate the potential of the technique.

Suggested Citation

  • George W. Evans & Seppo Honkapohja, 2007. "The E‐Correspondence Principle," Economica, London School of Economics and Political Science, vol. 74(293), pages 33-50, February.
    • Handle: RePEc:bla:econom:v:74:y:2007:i:293:p:33-50
    DOI: 10.1111/j.1468-0335.2006.00519.x
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    Cited by:

    1. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, March.
    2. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

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