Hysteresis in Economic Systems

Rod Cross, Michael Grinfeld () and Laura Piscitelli
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Michael Grinfeld: University of Strathclyde

No 723, Computing in Economics and Finance 1999 from Society for Computational Economics

Abstract: This paper describes how the Preisach model, with its superposition of hysteresis play operators, can be applied to economic systems. At the micro level economic agents, because of fixed or sunk costs of adjustment, adjust discontinuously to changes in state variables and have different trigger points for adjustment. Illustrations of this analytical framework are provided. Simulation exercises are pursued using plausible parameter values. A programme is then constructed to yield hysteresis measures for economic time series, which are then used to test for the presence of hysteresis in steady state relationships.

Date: 1999-03-01
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