How Do Strategic Complementarity and Substitutability Shape Equilibrium Dynamics?

Macroeconomic dynamics are shaped by how individual incentives to spend and accumulate interact with the decisions of others. The goal of this paper is to identify--within a simple large-game-theoretic structure--which types of agent interactions favor which types of dynamic equilibrium outcomes. In particular, we extend the static analysis of Cooper and John 1988 to a dynamic setting to clarify the role of strategic complementarity and substitutability in delivering dynamics such as monotonic convergence to a unique steady state, hysteresis, endogenous cycles, and indeterminacy