E-stability and stability of adaptive learning in models with private information
AbstractThe paper demonstrates how the E-stability principle introduced by Evans and Honkapohja [2001. Learning and Expectations in Macroeconomics. Princeton University Press, Princeton, NJ] can be applied to models with heterogeneous and private information in order to assess the stability of rational expectations equilibria under learning. The paper extends already known stability results for the Grossman and Stiglitz [1980. On the impossibility of informationally efficient markets. American Economic Review 70, 393-408] model to a more general case with many differentially informed agents and to the case where information is endogenously acquired by optimizing agents. In both cases it turns out that the rational expectations equilibrium of the model is inherently E-stable and thus locally stable under recursive least squares learning.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 33 (2009)
Issue (Month): 12 (December)
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Web page: http://www.elsevier.com/locate/jedc
Recursive least squares learning E-stability Rational expectations Private information;
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.:
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- Maik Heinemann, 2010. "Stability under learning of equilibria in financial markets with supply information," Economics Bulletin, AccessEcon, vol. 30(1), pages 383-391.
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