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Abstract

An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. Various forms of structural heterogeneity can arise and we study the important case of economies in which agents' behavior depends on forecasts of aggregate variables and show how different forms of heterogeneity in structure, forecasts, and adaptive learning rules affect the conditions for convergence of adaptive learning towards rational expectations equilibrium. Results are applied to the market model with supply lags and a New Keynesian model of interest rate setting. JEL Classification: D83; C62; E30.

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 120.

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Length: 50 pages
Date of creation: Jan 2002
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Handle: RePEc:ecb:ecbwps:20020120

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Related research

Keywords: Adaptive learning; expectations formation; stability of equilibrium; market model; monetary policy.;

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Find related papers by JEL classification:

• C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
• D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
• E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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