Econ 8050/Chatterjee Saddle-Point Behavior and Phase Diagrams

In order to maintain stability, one of the variables, say y, must be a “jump” variable (or a “control” variable) which can respond instantaneously to new information and/or shocks, while the other variable, x, must be a “sluggish” variable (or a “state” variable) which is constrained to evolve continuously at all times. Therefore, unlike the “jump” variable y, x cannot change instantaneously in response to new information.