Premium
Adjustment Asymmetries and Hysteresis in Simple Dynamic Models[Note 1. I would like to thank an anonymous referee as ...]
Author(s) -
Setterfield Mark
Publication year - 1998
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00102
Subject(s) - economics , simple (philosophy) , hysteresis , econometrics , keynesian economics , mathematical economics , physics , philosophy , epistemology , quantum mechanics
We consider the formal modelling of hysteresis in the light of the notion that this process is a special case, contingent on the existence of unit roots in first‐order difference equations. It is argued that variables displaying adjustment asymmetries along disequilibrium time paths can generate hysteresis, irrespective of the existence of unit roots. Examples of adjustment asymmetries and hysteresis in investment and in the Phillips curve are provided.