The E‐Correspondence Principle

George Evans and Seppo Honkapohja

Economica, 2007, vol. 74, issue 293, 33-50

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.

Date: 2007
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https://doi.org/10.1111/j.1468-0335.2006.00519.x

Related works:
Working Paper: The E-correspondence Principle (2005)
Working Paper: The E-Correspondence Principle (2004)
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