Big shocks versus small shocks in a dynamic stochastic economy with many interacting agents

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dc.contributor.author Kelly, Morgan
dc.date.accessioned 2008-08-29T08:49:10Z
dc.date.available 2008-08-29T08:49:10Z
dc.date.copyright Copyright 1994 Published by Elsevier Science B.V. en
dc.date.issued 1997-03
dc.identifier.citation Journal of Economic Dynamics and Control en
dc.identifier.issn 0165-1889
dc.identifier.uri http://hdl.handle.net/10197/518
dc.description.abstract This paper investigates the conditions under which a dynamic, stochastic macroeconomic model with many interacting agents will exhibit the ‘small shocks, large shocks’ property that is often said to characterize observed time series: small shocks have a transient impact on the system, whereas a sufficiently large shock will change its trajectory forever. An example is analyzed where the steady state distribution of output has a unique mode if the variance of labor productivity is sufficiently high; but has two modes, each with its own basin of attraction, if the variance falls below a critical value. An unanticipated exogenous shock can have a long lasting impact if it moves the economy into the basin of attraction of a different output mode. A general result is derived showing that the invariant measure of output can have multiple modes if each firm's probability of producing increases appropriately as the number of other firms producing rises. en
dc.format.extent 4304 bytes
dc.format.mimetype application/pdf
dc.language.iso en en
dc.publisher Elsevier Science B.V. en
dc.rights All rights reserved en
dc.rights.uri Publisher's copyright policy en
dc.rights.uri http://www.elsevier.com/wps/find/authorsview.authors/copyright#whatrights en
dc.subject Coordination failure en
dc.subject Production shocks en
dc.subject.classification E32 en
dc.subject.lcsh Stochastic models en
dc.subject.lcsh Production (Economic theory) en
dc.title Big shocks versus small shocks in a dynamic stochastic economy with many interacting agents en
dc.type Journal Article en
dc.internal.authorurl Morgan Kelly (web page) en
dc.internal.authorurl http://www.ucd.ie/economics/staff/mkelly/morgan.kelly.htm en
dc.internal.authorcontactother Email: morgan.kelly@ucd.ie; Tel: 353 1 716 8611 en
dc.internal.authorid UCD0013 en
dc.internal.availability Full text not available en
dc.internal.webversions Publisher's version en
dc.internal.webversions http://dx.doi.org/10.1016/0165-1889(94)90015-9 en
dc.status Peer reviewed en
dc.identifier.volume 18 en
dc.identifier.issue 2 en
dc.identifier.startpage 397 en
dc.identifier.endpage 410 en
dc.identifier.doi 10.1016/0165-1889(94)90015-9
dc.neeo.contributor Kelly|Morgan|aut|UCD0013


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