Graphically the model can be shown to be saddle-point stable, i.e. there is a unique trajectory towards

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Graphically the model can be shown to be saddle-point stable, i.e. there is a unique trajectory towards the new equilibrium following a shock. At impact the capital stock is predetermined (accumulated in the past) but Tobin's q can jump to incorporate new information.

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Foundations Of Modern Macroeconomics

ISBN: 9781264857937

1st Edition

Authors: Ben J. Heijdra, Frederick Van Der Ploeg

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