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Learning Stability in Economies with Heterogenous Agents

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Abstract

An economy exhibits structural heterogeneity when the forecasts of di?erent agents have different effects on the determination of aggregate variables. We study the important case of economies in which agents’ behavior depends on forecasts of aggregate variables and show how di?erent forms of heterogeneity in structure, forecasts, and adaptive learning rules a?ect the conditions for convergence of adaptive learning towards rational expectations equilibrium. Results are applied to a market model with speculative demand and a New Keynesian model of interest rate setting.

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File URL: http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe0417.pdf
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Bibliographic Info

Paper provided by Department of Economics, Royal Holloway University of London in its series Royal Holloway, University of London: Discussion Papers in Economics with number 04/17.

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Length: 30 pages
Date of creation: Jul 2004
Date of revision: Jul 2004
Handle: RePEc:hol:holodi:0417

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Web page: http://www.rhul.ac.uk/economics/

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Postal: Egham Hill, Egham, Surrey, TW20 0EX, UK.
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Keywords: Adaptive learning; expectations formation; stability of equilibrium; market model; inflation; monetary policy;

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