The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Transversality Conditions and Dynamic Economic Behaviour

  • Takashi Kamihigashi
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2201

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.

Keywords

Bubbles Calculus of variations Dynamic models Dynamic optimization Euler equations Hyperdeflation Infinite horizons Optimality Overlapping generations models Ponzi games Ramsey model Transversality condition Transversality conditions and dynamic economic behaviour 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Takashi Kamihigashi
    • 1
  1. 1.