Testing for a unique equilibrium in applied general equilibrium models

Article Abstract:

Applied general equilibrium (AGE) models have to be tested for uniqueness since the existence of multiple equilibria can lead to the misinterpretation of computational results. A test for uniqueness that is not a grid search is proposed. This test, which does not involve the use of an all-solutions algorithm, is based on a search for critical economies in a subset of the model's parameter space. It is best applied to the analysis of AGE models constructed for exchange economies.

Research, Capitalism, Multiplicity (Mathematics)

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Equilibrium beliefs in linear rational expectations models

Article Abstract:

A user-friendly solution strategy that can be used for a large class of dynamic, multivariate linear models with forward-looking projections is proposed as an alternative to dynamic models where equilibrium non-uniqueness is prevalent. The proposed model addresses two issues, namely, how are sets of equilibria represented or characterized and how can one distinguish among these equilibria or among sets of equilibria.

Econometrics & Model Building, Evaluation, Econometrics, Mathematical models, Business models

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