An Alternative Approach — Modelling with Hysteresis

Mark Setterfield

Chapter 2 in Rapid Growth and Relative Decline, 1997, pp 20-43 from Palgrave Macmillan

Abstract: Abstract If we assume that an economic system is permanently in a state of long-run equilibrium (that is, that it will adjust instantaneously to this state from any arbitrary starting point), then questions posed by the nature of the intertemporal behaviour of the economy are of little importance.1 As long as economic activity is governed by conditions of long-run equilibrium, a configuration which is itself determined at any point in time by a set of exogenously given data, the economy will simply replicate itself through time in the form of a determinate equilibrium time path.2 There will be no endogenous tendencies for the existing configuration of the economy to change, whilst the disturbing effects of random shocks will be instantaneously corrected.

Keywords: Unit Root; Relative Decline; Indeterminate Outcome; Individual Decision Maker; Hysteretic System (search for similar items in EconPapers)
Date: 1997
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DOI: 10.1057/9780230375871_2

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