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Functional Sunspot Equilibria

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Author Info

  • Shurojit Chatterji

    ()
    (Centro de Investigación Económica, ITAM)

  • Subir Chattopadhyay

    (Universidad de Alicante)

Abstract

Consider a one step forward looking model where agents believe that the equilibrium values of the state variable are determined by a function whose domain is the current value of the state variable and whose range is the value for the subsequent period. An agent's forecast for the subsequent period uses the belief, where the function that is chosen is allowed to depend on the current realization of an extrinsic random process, and is made with knowledge of the past values of the state variable but not the current value. The paper provides (and characterizes) the conditions for the existence of sunspot equilibria for the model described.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2005-39.pdf
File Function: Fisrt version / Primera version, 2005
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-39.

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Length: 19 pages
Date of creation: Dec 2005
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2005-39

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Keywords: extrinsic uncertainty; stochastic equilibria;

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References

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  1. Chiappori, P.A. & Guesnerie, R., 1993. "Rational Random Walks," DELTA Working Papers 93-07, DELTA (Ecole normale supérieure).
  2. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
  3. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  4. Piero Gottardi & Subir Chattopadhyay, 1999. "- Stochastic Olg Models, Market Structure And Optimality," Working Papers. Serie AD 1999-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Bloise, Gaetano, 2004. "A note on sunspot equilibrium in sequential economies," Research in Economics, Elsevier, vol. 58(1), pages 59-74, March.
  6. Grandmont Jean-michel & Laroque G, 1990. "Economic dynamics with learning : some instability examples," CEPREMAP Working Papers (Couverture Orange) 9007, CEPREMAP.
  7. Grandmont Jean-michel, 1985. "Stabilizing competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8518, CEPREMAP.
  8. Michael Magill & Martine Quinzii, 2003. "Indeterminacy of equilibrium in stochastic OLG models," Economic Theory, Springer, vol. 21(2), pages 435-454, 03.
  9. Karl Shell & Aditya Goenka, 1997. "Robustness of sunspot equilibria," Economic Theory, Springer, vol. 10(1), pages 79-98.
  10. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  11. Rao Aiyagari, S. & Peled, Dan, 1991. "Dominant root characterization of Pareto optimality and the existence of optimal equilibria in stochastic overlapping generations models," Journal of Economic Theory, Elsevier, vol. 54(1), pages 69-83, June.
  12. Azariadis, Costas & Guesnerie, Roger, 1986. "Sunspots and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 725-37, October.
  13. Julio DÂvila, 1997. "Sunspot fluctuations in dynamics with predetermined variables," Economic Theory, Springer, vol. 10(3), pages 483-495.
  14. Peck, James, 1988. "On the existence of sunspot equilibria in an overlapping generations model," Journal of Economic Theory, Elsevier, vol. 44(1), pages 19-42, February.
  15. Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, vol. 48(2), pages 337-368, August.
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