The Instantaneous Speed of Adjustment Assumption and Stability of Economic Models

Lambert Schoonbeek

Economic Theory, 1995, vol. 5, issue 2, 353-59

Abstract: In order to simplify stability analysis of an economic model one can assume that one of the model variables moves infinitely fast towards equilibrium, given the values of the other slower variables. We present conditions such that stability of the simplified model implies, or is implied by, stability of the original model. The conditions make use of the concept of a negative dominant diagonal. As an example, we analyse the (local) stability of a Walrasian general equilibrium model.

Date: 1995
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