Stability of Affine Difference Equation
If the absolute value of is less than 1 ( or ), the long run solution will be equal to the equilibrium value. We called the equilibrium value is attracting or stable. Regardless the choice of , the solution of a stable difference equation will stabilize itself even if it is temporarily perturbed from its course.
Even if the absolute value of is not less than 1 ( or ), the long run solution may be equal to the equilibrium if the value of is chosen properly to get a constant solution (i.e. ). This equilibrium value is unstable or repelling because any deviation, however slight, will prevent the solution from returning to its equilibrium value. For , if the solution will never be a constant (no equilibrium value, go without bound) and if then the solution is always a constant. In this later case the equilibrium is unstable (repelling) because if the solution is perturbed, it remains at its perturbed value and does not return to its original value.See also: Application in Personal Finance
Preferable reference for this tutorial is
Teknomo, Kardi (2015) Difference Equation Tutorial. https:\\people.revoledu.com\kardi\ tutorial\DifferenceEquation\