Expectations Formation and Stability of Large Socioeconomic Systems
AbstractThis paper attempts to identify some of the basic reasons why adaptive learning may or may not lead to stability and convergence to self-fulfilling expectations. It is shown that, if agents are somewhat uncertain about the local stability of the system, the learning dynamics is locally divergent. On the other hand, if agents are fairly sure of the local stability of the system, one may indeed get local stability. This 'uncertainty principle' does show up in a wide variety of contexts.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 66 (1998)
Issue (Month): 4 (July)
Other versions of this item:
- Grandmont, Jean-Michel, 1994. "Expectations formation and stability of large socioeconomic systems," CEPREMAP Working Papers (Couverture Orange) 9424, CEPREMAP.
- GRANDMONT, Jean-Michel, 1997. "Expectations formation and stability of large socioeconomic systems," CORE Discussion Papers 1997088, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jean-Michel Grandmont, 1997. "Expectations Formation and Stability of Large Socioeconomic Systems," Working Papers 97-27, Centre de Recherche en Economie et Statistique.
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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