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Rational Random Walks

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  • Pierre-André Chiappori
  • Roger Guesnerie

Abstract

The paper examines, within the framework of a multi-dimensional one-step forward-looking model, a special category of rational expectations equilibria. Their support is infinite with two accumulation points (steady states); the stochastic motion of the system is of random-walk type. A general strategy for an existence proof—associated with the study of a dynamical system—stresses necessary conditions. In a simple overlapping-generations model, the proof is made complete—no backwards bending labour supply is required in the pure sunspot case. By continuity, heteroclinic random walk equilibria are also shown to exist when shocks are real.

Suggested Citation

  • Pierre-André Chiappori & Roger Guesnerie, 1993. "Rational Random Walks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 837-864.
    • Handle: RePEc:oup:restud:v:60:y:1993:i:4:p:837-864.
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    File URL: http://hdl.handle.net/10.2307/2298102
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    Cited by:

    1. Chatterji, Shurojit & Chattopadhyay, Subir, 2006. "Functional sunspot equilibria," Journal of Mathematical Economics, Elsevier, vol. 42(1), pages 22-35, February.
    2. Shigoka, Tadashi, 1997. "On the nonstationary sunspot equilibria generated by an unbounded growth model," Japan and the World Economy, Elsevier, vol. 9(2), pages 261-277, May.
    3. Bloise, Gaetano, 2004. "A note on sunspot equilibrium in sequential economies," Research in Economics, Elsevier, vol. 58(1), pages 59-74, March.
    4. BLOISE, Gaetano & DRÈZE, Jacques & POLEMARCHAKIS, Heracles, 2002. "Money and indeterminacy over an infinite horizon," CORE Discussion Papers 2002021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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