The Mathematical Institute, University of Oxford, Eprints Archive

Hysteresis and Post Walrasian Economics

Cross, R. and McNamara, H. and Kalachev, L. and Pokrovski, A. (2011) Hysteresis and Post Walrasian Economics. Journal of Mathematical Economics . (Submitted)

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Abstract

Macroeconomics, hysteresis The “new consensus” dsge (dynamic stochastic general equilibrium) macroeconomic model has microfoundations provided by a single representative agent. In this model shocks to the economic environment do not have any lasting effects. In reality adjustments at the micro level are made by heterogeneous agents, and the aggregation problem cannot be assumed away. In this paper we show that the discontinuous adjustments made by heterogeneous agents at the micro level mean that shocks have lasting effects, aggregate variables containing a selective, erasable memory of the shocks experienced. This hysteresis framework provides foundations for the post-Walrasian analysis of macroeconomic systems.

Item Type:Article
Subjects:D - G > General
Research Groups:Oxford Centre for Collaborative Applied Mathematics
ID Code:1048
Deposited By:Peter Hudston
Deposited On:17 Feb 2011 09:29
Last Modified:09 Feb 2012 14:07

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