Evans, George W.

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https://hdl.handle.net/1794/3690

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Browsing Evans, George W. by Author "Guesnerie, R."

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    Coordination on saddle path solutions: the eductive viewpoint
    (University of Oregon, Dept. of Economics, 2001-05-15) Evans, George W., 1949-; Guesnerie, R.
    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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    Coordination on Saddle-Path Solutions: The Eductive Viewpoint -- Linear Multivariate Models
    (University of Oregon, Dept of Economics, 2003-10-10) Evans, George W., 1949-; Guesnerie, R.
    We examine local strong rationality (LSR) in multivariate models with both forward-looking expectations and predetermined variables. Given hypothetical common knowledge restrictions that the dynamics will be close to those of a specified minimal state variable solution, we obtain eductive stability conditions for the solution to be LSR. In the saddlepoint stable case the saddle-path solution is LSR provided the model is structurally homogeneous across agents. However, the eductive stability conditions are strictly more demanding when heterogeneity is present, as can be expected in multisectoral models. Heterogeneity is thus a potentially important source of instability even in the saddlepoint stable case.