The E-Correspondence Principle

27 Pages Posted: 17 Feb 2004

See all articles by George W. Evans

George W. Evans

University of Oregon - Department of Economics; University of St. Andrews - School of Economics and Finance

Seppo Honkapohja

Centre for Economic Policy Research (CEPR); Aalto University School of Business; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Aalto University - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 2004

Abstract

We introduce the E-correspondence principle for stochastic dynamic expectations models as a tool for comparative dynamics analysis. The principle is applicable to equilibria that are stable under least squares and closely related learning rules. With this technique it is possible to study, without explicit solving for the equilibrium, how properties of the equilibrium are affected by changes in the structural parameters of the model. Even when qualitative comparative dynamics results are not obtainable, a quantitative version of the principle can be applied.

Keywords: comparative dynamics, rational expectations, stability of equilibrium, adaptive

JEL Classification: C62, C65, D52, E10, E52

Suggested Citation

Evans, George W. and Honkapohja, Seppo and Honkapohja, Seppo, The E-Correspondence Principle (January 2004). Available at SSRN: https://ssrn.com/abstract=495983 or http://dx.doi.org/10.2139/ssrn.495983

George W. Evans

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
541-346-4662 (Phone)
541-346-1243 (Fax)

University of St. Andrews - School of Economics and Finance ( email )

The Scores, Castlecliff
St. Andrews, Fife KY16 8RD
United Kingdom
44-1334-462435 (Phone)

HOME PAGE: http://www.st-andrews.ac.uk/economics/staff/pages.g.evans.shtml

Seppo Honkapohja (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Aalto University School of Business ( email )

, PO Box 21210
Aalto FI-00076
Finland

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Aalto University - School of Business

Finland

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