Learning and Equilibrium Selection in a Monetary Overlapping Generations Model with Sticky Prices
AbstractWe 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 the model setup but generates multiple temporary equilibria when prices are flexible and prevents a straightforward construction of the learning dynamics. Sticky prices overcome this problem by avoiding simultaneity between prices and price expectations. Adaptive learning then robustly selects the determinate (monetary) steady state independent from the degree of imperfect competition. The indeterminate (non-monetary) steady state and non-stationary equilibria are never stable. Stability in a deterministic version of the model may differ because perfect foresight equilibria can be the limit of restricted perceptions equilibria of the stochastic economy with vanishing noise and thereby inherit different stability properties. This discontinuity at the zero variance of shocks suggests one should analyse learning in stochastic models. Copyright The Review of Economic Studies Limited, 2003.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Economic Studies.
Volume (Year): 70 (2003)
Issue (Month): 4 (October)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527
Other versions of this item:
- Klaus Adam, 2003. "Learning and Equilibrium Selection in a Monetary Overlapping Generations Model with Sticky Prices," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 887-907.
- Adam, Klaus, 2003. "Learning and Equilibrium Selection in a Monetary Overlapping Generations Model with Sticky Prices," CFS Working Paper Series 2003/03, Center for Financial Studies (CFS).
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lettau, Martin & Van Zandt, Timothy, 2001.
"Robustness of Adaptive Expectations as an Equilibrium Selection Device,"
CEPR Discussion Papers
2882, C.E.P.R. Discussion Papers.
- Lettau, M. & Van Zandt, T., 1995. "Robustness of Adaptive Expections as an Equilibrium Selection Device," Papers 9598, Tilburg - Center for Economic Research.
- Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, vol. 48(2), pages 337-368, August.
- Klaus Adam, 2002. "Adaptive Learning and Cyclical Behavior of Output and Inflation," Macroeconomics 0211013, EconWPA.
- Klaus Adam, 2007.
"Experimental Evidence on the Persistence of Output and Inflation,"
Royal Economic Society, vol. 117(520), pages 603-636, 04.
- Adam, Klaus, 2005. "Experimental Evidence on the Persistence of Output and Inflation," CEPR Discussion Papers 4885, C.E.P.R. Discussion Papers.
- Adam, Klaus, 2005. "Experimental evidence on the persistence of output and inflation," Working Paper Series 0492, European Central Bank.
- Martin Ellison & Joseph Pearlman, 2010.
Economics Series Working Papers
505, University of Oxford, Department of Economics.
- Adam, Klaus & Marcet, Albert & Nicolini, Juan Pablo, 2007.
"Stock Market Volatility and Learning,"
CEPR Discussion Papers
6518, C.E.P.R. Discussion Papers.
- Albert Marcet & Klaus Adam & Juan Pablo Nicolini, 2008. "Stock Market Volatility and Learning," UFAE and IAE Working Papers 732.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Adam, Klaus & Marcet, Albert & Nicolini, Juan Pablo, 2012. "Stock Market Volatility and Learning," Working Papers 12-06, University of Mannheim, Department of Economics.
- Klaus Adam & Albert Marcet & Juan Pablo Nicolini, 2013. "Stock Market Volatility and Learning," Working Papers 336, Barcelona Graduate School of Economics.
- Adam, Klaus & Marcet, Albert & Nicolini, Juan Pablo, 2008. "Stock market volatility and learning," Working Paper Series 0862, European Central Bank.
- Klaus Adam & Albert Marcet & Juan Pablo Nicolini, 2011. "Stock Market Volatility and Learning," CEP Discussion Papers dp1077, Centre for Economic Performance, LSE.
- Adam, Klaus & Evans, George W. & Honkapohja, Seppo, 2003.
"Are stationary hyperinflation paths learnable?,"
CFS Working Paper Series
2004/15, Center for Financial Studies (CFS).
- Adam, Klaus & Evans, George W. & Honkapohja, Seppo, 2006. "Are hyperinflation paths learnable?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2725-2748, December.
- Adam, Klaus & Marcet, Albert, 2011.
"Internal rationality, imperfect market knowledge and asset prices,"
Journal of Economic Theory,
Elsevier, vol. 146(3), pages 1224-1252, May.
- Klaus Adam & Albert Marcet, 2011. "Internal Rationality, Imperfect Market Knowledge and Asset Prices," CEP Discussion Papers dp1068, Centre for Economic Performance, LSE.
- Seonghoon Cho & Antonio Moreno, 2006. "Expectational Stability in Multivariate Models," Faculty Working Papers 06/08, School of Economics and Business Administration, University of Navarra.
- McCallum, Bennett T., 2007.
"E-stability vis-a-vis determinacy results for a broad class of linear rational expectations models,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 31(4), pages 1376-1391, April.
- Bennett T. McCallum, 2006. "E-Stability vis-a-vis Determinacy Results for a Broad Class of Linear Rational Expectations Models," NBER Working Papers 12441, National Bureau of Economic Research, Inc.
- Jordi Gal?, 2014. "Monetary Policy and Rational Asset Price Bubbles," American Economic Review, American Economic Association, vol. 104(3), pages 721-52, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.