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Hysteresis and post Walrasian economics. (English) Zbl 1268.91121

Summary: 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.

MSC:

91B64 Macroeconomic theory (monetary models, models of taxation)
91B02 Fundamental topics (basic mathematics, methodology; applicable to economics in general)
47J40 Equations with nonlinear hysteresis operators
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