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Existence of Adaptively Stable Sunspot Equilibria Near an Indeterminate Steady State

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  • George W. Evans
  • Seppo Honkapohja

Abstract

We examine the nonlinear model Xt = Et F(xt+1) . Markov SSEs exist near an indeterminate steady state, X = F(X), provided F´(X)> 1. We show that there exist Markov SSEs that are E-stable, and therefore locally stable under adaptive learning, if F´(X)

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 478.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_478

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Keywords: Indeterminacy; learnability; expectational stability; endogenous fluctuations;

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  1. Howitt, P. & Mcfee, R.P., 1990. "Animal Spirits," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9005, University of Western Ontario, Department of Economics.
  2. George W. Evans & Seppo Honkapohja & Ramon Marimon, 2003. "Stable Sunspot Equilibria in a Cash-in-Advance Economy," Working Papers 14, Barcelona Graduate School of Economics.
  3. Honkapohja, Seppo & Mitra, Kaushik, 2001. "Are Non-Fundamental Equilibria Learnable in Models of Monetary Policy?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2846, C.E.P.R. Discussion Papers.
  4. Desgranges, Gabriel & Negroni, Giorgio, 2003. "Expectations Coordination On A Sunspot Equilibrium: An Eductive Approach," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 7(01), pages 7-41, February.
  5. Evans, Geroge W & Honkapohja, Seppo & Romer, Paul, 1998. "Growth Cycles," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 495-515, June.
  6. Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448 Elsevier.
  7. Chiappori, Pierre-Andre & Geoffard, Pierre-Yves & Guesnerie, Roger, 1992. "Sunspot Fluctuations around a Steady State: The Case of Multidimensional, One-Step Forward Looking Economic Models," Econometrica, Econometric Society, Econometric Society, vol. 60(5), pages 1097-126, September.
  8. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(2), pages 193-227, April.
  9. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, Elsevier, vol. 25(3), pages 380-396, December.
  10. Woodford, Michael, 1990. "Learning to Believe in Sunspots," Econometrica, Econometric Society, Econometric Society, vol. 58(2), pages 277-307, March.
  11. Evans George W. & Honkapohja Seppo, 1994. "On the Local Stability of Sunspot Equilibria under Adaptive Learning Rules," Journal of Economic Theory, Elsevier, Elsevier, vol. 64(1), pages 142-161, October.
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