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Adaptive learning and complex dynamics

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  • Gomes, Orlando

Abstract

In this paper, we explore the dynamic properties of a group of simple deterministic difference equation systems in which the conventional perfect foresight assumption gives place to a mechanism of adaptive learning. These systems have a common feature: under perfect foresight (or rational expectations) they all possess a unique fixed point steady state. This long-term outcome is obtained also under learning if the quality underlying the learning process is high. Otherwise, when the degree of inefficiency of the learning process is relatively strong, nonlinear dynamics (periodic and a-periodic cycles) arise. The specific properties of each one of the proposed systems is explored both in terms of local and global dynamics. One macroeconomic model is used to illustrate how the formation of expectations through learning may eventually lead to awkward long-term outcomes.

Suggested Citation

  • Gomes, Orlando, 2009. "Adaptive learning and complex dynamics," Chaos, Solitons & Fractals, Elsevier, vol. 42(2), pages 1206-1213.
    • Handle: RePEc:eee:chsofr:v:42:y:2009:i:2:p:1206-1213
    DOI: 10.1016/j.chaos.2009.03.077
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    Cited by:

    1. Orlando Gomes, 2010. "Ordinary Least Squares Learning And Nonlinearities In Macroeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 52-84, February.
    2. Kostevšek, Anja & Petek, Janez & Čuček, Lidija & Pivec, Aleksandra, 2013. "Conceptual design of a municipal energy and environmental system as an efficient basis for advanced energy planning," Energy, Elsevier, vol. 60(C), pages 148-158.

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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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