In this work we analyze a credit economy à la Kiyotaki and Moore (JPE, 1997) enriched with learning dynamics. Both borrowers and lenders need to make expectations about the future price of the collateral, and under heterogeneous learning this can have interesting consequences for the economy...

The literature on bounded rationality and learning in macroeconomics has often used recursive algorithms such as least squares and stochastic gradient to depict the evolution of agents' beliefs over time. In this work, we try to assess the plausibility of such practice from an empirical...

Stylized facts about statistical properties for short horizon returns in financial markets have been identified in the literature, but a common cause for their manifestation has yet to be found. We show that a simple asset pricing model with representative agent and rational expectations is able...

In this paper we investigate the possibility of sunspot equilibria to emerge from a process of learning and adaptation on agents' beliefs. To such end, we consider both …finite state Markov sunspots and sunspots in autoregressive form and derive conditions for the existence of an heterogeneous...

We provide a critical review on the methods previously adopted into the literature of learning and expectations in macroeconomics in order to initialize its underlying learning algorithms either for simulation or empirical purposes. We find that none of these methods is able to pass the sieve of...

Digressing into the origins of the two main algorithms considered in the literature of adaptive learning, namely Least Squares (LS) and Stochastic Gradient (SG), we found a connection between their non-recursive forms and their interpretation within a state-space unifying framework. Based on...

In his monograph The conquest of American inflation (1999) Sargent suggests that the sharp reduction in US inflation that took place under Volker may vindicate the type of econometric policy evaluation famously criticized by Lucas (1976). At the core of this vindication strory are the escape...

In a simple, forward looking linear stochastic model we investigate the impact of heterogeneity in expectations formation on the speed of convergence of the learning process of agents towards equilibrium. We …nd that even when heterogeneity does not a¤ect learnability in term of its...

We explore real time, adaptive nonlinear learning dynamics in stochastic macroeconomic systems. Rather than linearizing nonlinear Euler equations where expectations play a role around a steady state, we instead approximate the nonlinear expected values using the method of parameterized...

The optimal discretionary policy rule in the New Keynesian forwardlooking model under the hypothesis of rational expectations responds only to fundamental shocks. This leads to indeterminacy of equilibria and E-unstability of the MSV REE. The outcome can be improved by responding to private...