Unstable and Stable Steady-States in the Kiyotaki-Wright Model

Juan M. Renero ()
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Juan M. Renero: Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)

No 9603, Working Papers from Centro de Investigacion Economica, ITAM

Abstract: I provide new results concerning dynamics for the Kiyotaki-Wright model (1989). I permit mixed strategies, but only those that restrict agents to play a unique strategy for each opportunity set. My results demonstrate the importance of examining stability in such models, because they show that many steady states focused on in the literature are not stable. One counterintuitive result is that very often there does exist a locally-stable steady state with highest acceptance rate of the most costly to-store good, while the steady state with universal acceptance of the least costly to-store good i generically unstable.

Pages: 22 pages
Date: 1996
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cie:wpaper:9603

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