The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Multiple Equilibria in Macroeconomics

  • Costas Azariadis
Reference work entry


The multiple equilibrium literature seeks explanations for excessive economic volatility, persistent poverty, market fads and fashions, and related macroeconomic phenomena that appear to be anomalies in standard models of rational economic behaviour. Terms like animal spirits, sunspots, irrational exuberance, indeterminacy, and bubbles describe situations of multiple equilibrium. All such ideas assert that future values of macroeconomic states cannot be predicted accurately from knowledge of economic fundamentals. This article describes four types of multiple equilibria common in macroeconomics (missing initial conditions, multiple laws of motion, multiple attractors, and non-fundamental state variables), discusses their causes and reviews what they teach us about economic policy.


Animal spirits Bubbles Extraneous random variables Imperfect asset markets Income effect Increasing returns Indeterminacy Jump variables Missing initial conditions Multiple equilibria in macroeconomics Multiple laws of motion Overlapping generations models Public debt Stable manifolds 

JEL Classification

D4 D10 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Costas Azariadis
    • 1
  1. 1.