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Expectational business cycles Author info | Abstract | Publisher info | Download info | Related research | Statistics Guse, Eran (Department of Applied Economics, University of Cambridge)
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I introduce Expectational Business Cycles where aggregate activity fluctuates due to learning, heterogeneous updating rules and random changes in the social norm predictor. Agents use one of two updating rules to learn the equilibrium values while heterogeneity is dictated via an evolutionary process. Uncertainty of a new equilibrium, due to a shock to the structure of the economy, results in a sudden decrease in output. As agents learn the equilibrium, output slowly increases to its equilibrium value. These business cycles arrive faster, are longer and more severe as agents possess less rationality.
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Paper provided by Bank of Finland in its series Research Discussion Papers with number
19/2004.
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Length: 38 pages
Date of creation: 12 Oct 2004Date of revision:
Handle: RePEc:hhs:bofrdp:2004_019Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland Web page: http://www.bof.fi/en/tutkimus More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Minna Valkama).
Keywords: adaptive learning ; aggregate fluctuations ; heterogeneous expectations ; multiple equilibria ; rational expectations ; Other versions of this item:
Find related papers by JEL classification: C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation
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