The Macroeconomic Consequences of Discontinuous Adjustment: Selective Memory of Non-dominated Extrema.

This paper deals with the macroeconomic consequences of discontinuous adjustment by heterogenous agents. The method used to analyze this problem is based on the Krasnosel'skii decomposition of systems into hysteresis operators. This method is applied to a simple model of asset-switching. The novel property is that the nondominated extremum values of the interest-rate-driving variable help determine the aggregate stocks of assets. Copyright 1994 by Scottish Economic Society.