TY  - JOUR
AU  - Krugman,Paul
TI  - History Vs. Expectations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2971
PY  - 1989
Y2  - May 1989
UR  - http://www.nber.org/papers/w2971
L1  - http://www.nber.org/papers/w2971.pdf
N1  - Author contact info:
Paul R. Krugman
Department of Economics
Princeton University
Woodrow Wilson School
Princeton, NJ  08544
Tel: 609/258-4570
Fax: 609/258-2809
E-Mail: pkrugman@princeton.edu
AB  - In models with external economies, there are often two or more long run equilibria. Which equilibrium is chosen? Much of the literature presumes that "history" sets initial conditions which determine the outcome, but an alternative view stresses the role of "expectations", i.e. of self-fulfilling prophecy. This paper uses a simple trade model with both external economies and adjustment costs to show how the parameters of the economy determine the relative importance of history and expectations in determining equilibrium.
ER  -