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An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. Various forms of structural heterogeneity can arise and we study the important case of economies in which agents' behavior depends on forecasts...
Persistent link: https://www.econbiz.de/10010315457
We study the properties of generalized stochastic gradient (GSG) learning in forward-looking models. We examine how the conditions for stability of standard stochastic gradient (SG) learning both differ from and are related to E-stability, which governs stability under least squares learning. SG...
Persistent link: https://www.econbiz.de/10010261355
Tuning one's shower in some hotels may turn into a challenging coordination game with imperfect information. The temperature sensitivity increases with the number of agents, making the problem possibly unlearnable. Because there is in practice a finite number of possible tap positions, identical...
Persistent link: https://www.econbiz.de/10010264912
We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and...
Persistent link: https://www.econbiz.de/10010326517
This paper demonstrates that the adaptive learning approach to modelling private sector expectations can be used as an equilibriumselection mechanism in a natural-rate monetary model with unemployment persistence.In particular, it is shown that only one of the two rational expectations...
Persistent link: https://www.econbiz.de/10012147894
We study the impact of adaptive learning for the design of a robust monetary policy using a small open-economy New Keynesian model. We find that slightly departing from rational expectations substantially changes the way the central bank deals with model misspecification. Learning induces an...
Persistent link: https://www.econbiz.de/10012616405
We develop an overlapping generations monetary endogenous growth (generated by productive public expenditures) model with inflation targeting, characterized by relocation shocks for young agents, which in turn generates a role for money (even in the presence of the return-dominating physical...
Persistent link: https://www.econbiz.de/10013199651
In this paper, we present a model-based method for identifying fiscal closure rules in stochastic macroeconomic models. The methodology is based on the stability analysis of the model at hand, with an endogenous derivation of a reaction on the part of the fiscal authority to state variables in...
Persistent link: https://www.econbiz.de/10011604202
We develop a partial equilibrium model in which firms can locate in two separate regions. A firm's decision where to locate in a given period depends on the regions' relative profitability. If firms react strongly to the regions' relative profitability, their market switching behavior generates...
Persistent link: https://www.econbiz.de/10011654956
We study adaptive learning in a monetary overlapping generations model with sticky prices and monopolistic competition for the case where learning agents observe current endogenous variables. Observability of current variables is essential for informational consistency of the learning setup with...
Persistent link: https://www.econbiz.de/10010311975