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A Short History in Defence of Adaptive Learning

Author

Listed:
  • Stefano Eusepi
  • Bruce Preston

Abstract

This paper tells the story of adaptive learning. With origins in the rational expectations revolution, models of adaptive learning are as much about moving people’s expectations closer to rational expectations as further away. But relaxing the rational expectations requirement that subjective expectations are model consistent permits addressing a broader class of economic questions as well as resolving certain empirical puzzles. Importantly, models of optimal intertemporal decision making with adaptive learning are supported by a growing body of empirical evidence using surveys of professional, household, firm and policymaker forecasts.

Suggested Citation

  • Stefano Eusepi & Bruce Preston, 2023. "A Short History in Defence of Adaptive Learning," CAMA Working Papers 2023-52, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2023-52
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2023-10/52_2023_eusepi_preston.pdf
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    More about this item

    Keywords

    adaptive expectations; rational expectations; adaptive learning; inflation expectations;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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