How Do Strategic Complementarity and Substitutability Shape Equilibrium Dynamics?

Paul Beaudry, Dana Galizia and Franck Portier ()

No 32661, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Macroeconomic dynamics are shaped by how individual incentives to spend and accumulate interact with the decisions of others. The goal of this paper is to identify—within a simple large-game-theoretic structure—which types of agent interactions favor which types of dynamic equilibrium outcomes. In particular, we extend the static analysis of Cooper and John 1988 to a dynamic setting to clarify the role of strategic complementarity and substitutability in delivering dynamics such as monotonic convergence to a unique steady state, hysteresis, endogenous cycles, and indeterminacy.

JEL-codes: E0 (search for similar items in EconPapers)
Date: 2024-07
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