We analyze how different budgetary rules affect the stability of an economy in a basic endogenous growth model with public debt and a state-dependent consumption tax rate. We show that a discretionary policy implies that the government violates its inter-temporal budget constraint along a balanced growth path, whereas a balanced budget rule guarantees that the economy is stable. A rule based de...

We prove the non-emptiness of the core of an NTU game satisfying a condition of payoff-dependent balancedness, based on transfer rate mappings. We also define a new equilibrium condition on transfer rates and we prove the existence of core payoff vectors satisfying this condition. The additional requirement of transfer rate equilibrium refines the core concept and allows the selection of specif...

The correspondence principle suggests a link between asymptotic stability properties of equilibria of economic models and the equilibrium response to data that describe the model or the model environment. However, this link has been impaired by a logical-mathematical deficiency. This paper, by introducing a conceptual requirement of (local) structural stability as part of the principle hypothes...

We study adaptive learning in a monetary overlapping generations model with sticky prices and monopolistic competition for the case where learning agents observe current endogenous variables. Observability of current variables is essential for informational consistency of the learning setup with the model set up but generates multiple temporary equilibria when prices are flexible and prevents a...

In this paper, we present a model-based method for identifying fiscal closure rules in stochastic macroeconomic models. The methodology is based on the stability analysis of the model at hand, with an endogenous derivation of a reaction on the part of the fiscal authority to state variables in the model. The rule achieves the dual aim of imposing solvency on the fiscal sector and generating a s...

We consider a linear univariate rational expectations model, with a predetermined variable, and study existence and stability of solutions driven by an extraneous finite-state Markov process. We show that when the model is indeterminate there exists a new class of kstate dependent sunspot equilibria in addition to the k-state sunspot equilibria (k-SSEs) already known to exist in part of the ind...

We consider a growth model proposed by Matsuyama [K. Matsuyama, Growing through cycles, Econometrica 67 (2) (1999) 335–347] in which two sources of economic growth are present: the mechanism of capital accumulation (Solow regime) and the process of technical change and innovations (Romer regime). We will shown that no stable cycle can exist, except for a fixed point and a cycle of period two. T...

We introduce the notion of type-symmetric randomized equilibrium (TSRE) by requiring those agents with the same type of characteristics to choose the same randomized choice. Such a notion provides a generic micro-foundation for the macro notion of equilibrium distribution, as used in the literature on games and economies with many agents. In particular, we show that if the space of agents is mo...

This paper presents a Heterogeneous Agent Model of a financial market with chartist and fundamentalist traders that exhibit bounded rationality and short-term thinking to explain the effect of under and overreaction to news. The existence of the Market Maker’s finite price adjustment speed and the presence of risk aversion lead to the fact that prices do not adjust instantaneously to new inform...

This paper investigates a Trejos-Wright random matching model of money with a consumer take-it-or-leave-it offer and with individual money holdings in the set {0, 1, 2}. It is shown that three kinds of monetary steady states exist generically: (1) purestrategy full-support steady states, (2) mixed-strategy full-support steady states, and (3) non-full-support steady states. A full-support steady...