Abstract
Transversality conditions are optimality conditions often used along with Euler equations to characterize the optimal paths of dynamic economic models. This article illustrates the role of transversality conditions in characterizing optimal paths as well as in ruling out economic phenomena such as asset bubbles and hyperdeflations in infinite-horizon models.
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Kamihigashi, T. (2018). Transversality Conditions and Dynamic Economic Behaviour. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2201
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2201
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Print ISBN: 978-1-349-95188-8
Online ISBN: 978-1-349-95189-5
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