# American Institute of Mathematical Sciences

March  2013, 18(2): 377-401. doi: 10.3934/dcdsb.2013.18.377

## Hysteresis and post Walrasian economics

 1 Department of Economics, University of Strathclyde, Glasgow G4 0GE, United Kingdom 2 Oxford Centre for Collaborative Applied Mathematics, University of Oxford, Oxford OX1 3LB, United Kingdom 3 32 Campus Drive, Department of Mathematical Sciences, University of Montana, Missoula, MT 59812, United States 4 Department of Applied Mathematics, University College, Cork

Received  September 2011 Revised  January 2012 Published  November 2012

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.
Citation: Rod Cross, Hugh McNamara, Leonid Kalachev, Alexei Pokrovskii. Hysteresis and post Walrasian economics. Discrete & Continuous Dynamical Systems - B, 2013, 18 (2) : 377-401. doi: 10.3934/dcdsb.2013.18.377
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