Using a long-panel dataset of Japanese firms that contains firm-level sales forecasts, we provide evidence on firm-level uncertainty and imperfect information over their life cycle. We find that firms make non-negligible and positively correlated forecast errors. However, they make more precise...

This paper shows that an economy with unobservable preference shocks can be temporarily explosiveif adaptive learning agents focus on short run optimization but ignore long run constraints. However,when agents slowly learn that the economy will not be sustainable under the explosive path, they...

Uncertainty faced by individual firms appears to be heterogeneous. In this paper, I construct new empirical measures of firm-level uncertainty using data from the I/B/E/S and Compustat. These new measures reveal persistent differences in the degree of uncertainty facing individual firms not...

Expectations play a central role in modern macroeconomics. The econometric learning approach, in line with the cognitive consistency principle, models agents as forming expectations by estimating and updating subjective forecasting models in real time. This approach provides a stability test for...

We consider a linear stochastic univariate rational expectations model, with a predetermined variable, and provide alternative representations of SSEs (stationary sunspot equilibria). For a strict subset of the parameter space there exist SSEs that are locally stable under least squares learning...

We examine the nonlinear model x(t)=E(t)F(x(t+1)). Markov SSEs (stationary sunspot equilibria) exist near an indeterminate steady state, x=F(x), provided |F'(x)| 1. Despite the importance of indeterminacy in macroeconomics, earlier results have not provided conditions for the existence of...

We develop a monetary model with flexible supply of labor, cash in advance constraints and government spending financed by seignorage. This model has two regimes. One regime is conventional with two steady states. The other regime has a unique steady state which can be determinate or...

I propose a flexible non-parametric method using Recurrent Neural Networks (RNN) to estimate a generalized model of expectation formation. This approach does not rely on restrictive assumptions of functional forms and parametric methods yet nests the standard approaches of empirical studies on...

We extend common factor analysis to a multi-dimensional setting by considering a bivariate reduced form model consistent with many Real Business Cycle type models. We show how to obtain new representations of sunspots and find that there are parameter regions in which these sunspots are stable...

We study firms' incentives to acquire costly information in booms and recessions to understand the role of endogenous information in explaining business cycles. We find that when the economy has been in a recession in the previous period, and firms enter the current period with a pessimistic...