Abstract
A rational expectations model of the stock exchange is constructed in the framework provided by the National Institute model (Version-7). The existing investment equations of this model are re-estimated so as to show sensitivity to the valuation ratio. A linear reduction of the amended National Institute model is derived and shown to possess saddle path properties. The linear reduction is used to derive the new equilibrium position after a fiscal contraction. The effects of jumps in the valuation ratio and the capital stock on the linear reduction and full non-linear models are then compared.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
