History versus Expectations
Name
ssrn-314630.pdf
Size
234.96 KB
Format
Adobe PDF
Checksum (MD5)
65751892d0e81f194ea3bc9848372f49
Author(s)
Krugman, Paul
Date Issued
May 1, 1991
Journal
The Quarterly Journal of Economics
Publisher
Oxford University Press
Citation
Paul Krugman, History versus Expectations, The Quarterly Journal of Economics, Volume 106, Issue 2, May 1991, Pages 651–667.
Version
Author's final manuscript
Abstract
In models with external economies, there are often two or more long-run equilibria. Which equilibrium is chosen? Much of the literature presumes that “history” sets initial conditions that determine the outcome, but an alternative view stresses the role of “expectations,” i.e., of self-fulfilling prophecy. This paper uses a simple trade model with both external economies and adjustment costs to show how the parameters of the economy determine the relative importance of history and expectations in determining equilibrium.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.2307/2937950
