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Expectations Coordination On A Sunspot Equilibrium: An Eductive Approach

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Author Info
Desgranges, Gabriel
Negroni, Giorgio

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Abstract

We analyze expectations coordination on a stationary sunspot equilibrium (SSE) using an eductive approach in which agents forecast the forecasts of others. This approach is grounded in some common-knowledge assumptions. We show that two institutional contexts may be envisaged; we also distinguish between stationary and nonstationary beliefs. We show that the conditions for eductive stability depend mainly on whether stationarity of beliefs is imposed. We also prove the existence of eductively stable SSEs by means of the Poincar Hopf theorem and show that eductively stable SSEs exist in a neighborhood of some indeterminate steady states.

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Publisher Info
Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 7 (2003)
Issue (Month): 01 (February)
Pages: 7-41
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Handle: RePEc:cup:macdyn:v:7:y:2003:i:01:p:7-41_01

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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.:
  1. Woodford, Michael, 1990. "Learning to Believe in Sunspots," Econometrica, Econometric Society, vol. 58(2), pages 277-307, March. [Downloadable!] (restricted)
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  2. Azariadis, Costas & Guesnerie, Roger, 1986. "Sunspots and Cycles," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 725-37, October. [Downloadable!] (restricted)
  3. Guesnerie, R., 1993. "Successes and Failures in Coordinating Expectations," DELTA Working Papers 93-08, DELTA (Ecole normale supérieure).
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  4. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December. [Downloadable!] (restricted)
  5. Marimon, R. & Spear, S. & Sunder, S., 1991. "Expectationally-Driven Market Volatility: An Experimental Study," GSIA Working Papers 1991-3, Carnegie Mellon University, Tepper School of Business.
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  6. Grandmont Jean-michel & Laroque G, 1990. "Economic dynamics with learning : some instability examples," CEPREMAP Working Papers (Couverture Orange) 9007, CEPREMAP.
  7. Evans, George W., 1989. "The fragility of sunspots and bubbles," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 297-317, March. [Downloadable!] (restricted)
  8. Guesnerie, R. & Woodford, M., 1990. "Stability of Cycles with Adaptive Learning Rules," DELTA Working Papers 90-25, DELTA (Ecole normale supérieure).
  9. Negroni, G., 2000. "Eductive Expectations Coordination in Dynamic Economies : the Case of Deterministic Cycles," DELTA Working Papers 2000-17, DELTA (Ecole normale supérieure).
  10. R. Guesnerie, 2002. "Anchoring Economic Predictions in Common Knowledge," Econometrica, Econometric Society, vol. 70(2), pages 439-480, March. [Downloadable!] (restricted)
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  11. Heinemann, Frank, . "Rationalizable Expectations and Sunspot Equilibria in an Overlapping Generations Economy," IVS discussion paper series 506, Institut für Volkswirtschaft und Statistik (IVS), University of Mannheim.
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  12. George W. Evans & Roger Guesnerie, 1999. "Coordination on saddle path solutions: the eductive viewpoint," University of Oregon Economics Department Working Papers 2001-7, University of Oregon Economics Department, revised 15 May 2001. [Downloadable!]
  13. Guesnerie, R. & Woodford, M., 1991. "Endogenous Fluctuations," DELTA Working Papers 91-10, DELTA (Ecole normale supérieure).
  14. Townsend, Robert M, 1978. "Market Anticipations, Rational Expectations, and Bayesian Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 481-94, June. [Downloadable!] (restricted)
  15. Guesnerie, Roger, 1992. "An Exploration of the Eductive Justifications of the Rational-Expectations Hypothesis," American Economic Review, American Economic Association, vol. 82(5), pages 1254-78, December. [Downloadable!] (restricted)
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  16. Evans George W. & Guesnerie Roger, 1993. "Rationalizability, Strong Rationality, and Expectational Stability," Games and Economic Behavior, Elsevier, vol. 5(4), pages 632-646, October. [Downloadable!] (restricted)
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  17. Chiappori, P.A. & Geoffard, P.Y. & Guesnerie, R., 1990. "Sunspot Fluctuations around a Steady State: The Case of Multidimensional One-Step forward Looking Economic Models," DELTA Working Papers 90-02, DELTA (Ecole normale supérieure).
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  18. Herbert Dawid, 1996. "Learning of cycles and sunspot equilibria by Genetic Algorithms (*)," Journal of Evolutionary Economics, Springer, vol. 6(4), pages 361-373.
  19. Evans George W. & Honkapohja Seppo, 1994. "On the Local Stability of Sunspot Equilibria under Adaptive Learning Rules," Journal of Economic Theory, Elsevier, vol. 64(1), pages 142-161, October. [Downloadable!] (restricted)
  20. Gauthier, S., 1999. "Determinacy and Stability Under Learning of Rational Expectations Equilibria," G.R.E.Q.A.M. 99a46, Universite Aix-Marseille III.
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  21. Guesnerie, Roger, 1993. "Theoretical tests of the rational expectations hypothesis in economic dynamical models," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 847-864. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. George W. Evans & Bruce McGough, 2003. "Monetary Policy, Indeterminacy and Learning," University of Oregon Economics Department Working Papers 2003-34, University of Oregon Economics Department, revised 01 Apr 2004. [Downloadable!]
    Other versions:
  2. George W. Evans & Bruce McGough, 2006. "Stable Finite-State Markov Sunspots," University of Oregon Economics Department Working Papers 2006-13, University of Oregon Economics Department. [Downloadable!]
  3. Roger Guesnerie, 2006. "General equilibrium, coordination and multiplicity on spot markets," PSE Working Papers 2006-05, PSE (Ecole normale supérieure). [Downloadable!]
  4. George W. Evans & Seppo Honkapohja, 2001. "Expectational Stability of Resonant Frequency Sunspot Equilibria," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. George W. Evans & Seppo Honkapohja, 2001. "Existence of Adaptively Stable Sunspot Equilibria Near an Indeterminate Steady State," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
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