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Heterogeneous expectations, sunspot equilibria and their fragility

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  • Berardi, Michele

Abstract

In a simple, univariate forward looking model, we show how a class of sunspot equilibria can depend on the relative fraction of agents under heterogeneous expectations. We then investigate if such equilibrium could be brought about by endogenous predictor choice dynamics.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4X5JR3C-1/2/6cf9e025c48047b54813fa8bc678d5b1
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 105 (2009)
Issue (Month): 3 (December)
Pages: 276-279

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Handle: RePEc:eee:ecolet:v:105:y:2009:i:3:p:276-279

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Sunspot equilibria Heterogeneous expectations Endogenous predictor choice;

References

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  1. repec:att:wimass:9530 is not listed on IDEAS
  2. George Evans & William Branch, 2003. "Intrinsic Heterogeneity in Expectation Formation," Computing in Economics and Finance 2003 312, Society for Computational Economics.
  3. Berardi, Michele, 2007. "Heterogeneity and misspecifications in learning," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3203-3227, October.
  4. George W. Evans & Seppo Honkapohja, 2002. "Expectational Stability of Stationary Sunspot Equilibria in a Forward-looking Linear Model," University of Oregon Economics Department Working Papers 2001-9, University of Oregon Economics Department, revised 14 Jan 2002.
  5. William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, vol. 65(5), pages 1059-1096, September.
  6. William Branch & George W. Evans, 2007. "Model Uncertainty and Endogenous Volatility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(2), pages 207-237, April.
  7. Evans, George W. & McGough, Bruce, 2005. "Stable sunspot solutions in models with predetermined variables," Journal of Economic Dynamics and Control, Elsevier, vol. 29(4), pages 601-625, April.
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Cited by:
  1. Alberto Locarno, 2012. "Monetary policy in a model with misspecified, heterogeneous and ever-changing expectations," Temi di discussione (Economic working papers) 888, Bank of Italy, Economic Research and International Relations Area.

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