On a possible interpretation of market dynamics based on the internal model principle

摘要

The internal model principle (IMP) of control theory is applied in the context of a market's dynamics with expectations on future prices. A feedback structure is assumed to exist in this market system, and by the IMP it is shown that the assumptions of global stability and perfect foresight of the equilibrium price imply the presence in the market operators of an internal model of the market itself. Relations with the theory of rational expectations are discussed.