Advanced Search
MyIDEAS: Login

Heterogeneous sunspots solutions under learning and replicator dynamics

Contents:

Author Info

  • Michele Berardi
Registered author(s):

    Abstract

    In a linear stochastic forward-looking univariate model with predetermined variables, we consider the possibility of heterogeneous equilibria with sunspots emerging endogenously through adaptive learning and replicator dynamics. In particular, we investigate equilibria where only a fraction of agents in the economy condition their forecasts on a sunspot, and equilibria where di¤erent groups of agents use di¤erent sunspots. We comclude that, although such heterogeneous equilibria exist and can be stable under adaptive learning, they do no survive under endogenous replicator dynamics. Moreover, we show that even homogeneous sunspot equilibria require some degree of coordinations among agents for them to emerge in an economy. We conclude that heterogeneous equilibria with sunspots are fragile under endogenous selection of predictors by agents, and that even the relevance of homogeneous sunspot equilibria is questioned once agents are allowed to doubt about the importance of sunspots in their forecasts.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/cgbcr/discussionpapers/dpcgbcr160.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 160.

    as in new window
    Length: 25 pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:man:cgbcrp:160

    Contact details of provider:
    Postal: Manchester M13 9PL
    Phone: (0)161 275 4868
    Fax: (0)161 275 4812
    Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/our-research/centre-for-growth-and-business-cycle-research/
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. George W. Evans & Seppo Honkapohja, 2001. "Existence of Adaptively Stable Sunspot Equilibria Near an Indeterminate Steady State," CESifo Working Paper Series 478, CESifo Group Munich.
    2. Bennett T. McCallum, 1983. "On Non-Uniqueness in Rational Expectations Models: An Attempt at Perspective," NBER Working Papers 0684, National Bureau of Economic Research, Inc.
    3. Hommes, C.H., 2007. "Bounded Rationality and Learning in Complex Markets," CeNDEF Working Papers 07-01, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    4. George W. Evans & Bruce McGough, 2003. "Monetary Policy, Indeterminacy and Learning," University of Oregon Economics Department Working Papers 2003-34, University of Oregon Economics Department, revised 01 Apr 2004.
    5. Eran A. Guse, 2008. "Heterogeneous Expectations, Adaptive Learning, and Evolutionary Dynamics," Working Papers 09-01, Department of Economics, West Virginia University.
    6. William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, vol. 65(5), pages 1059-1096, September.
    7. Evans, George W & Honkapohja, Seppo, 1992. "On the Robustness of Bubbles in Linear RE Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 1-14, February.
    8. Sethi, Rajiv & Franke, Reiner, 1995. "Behavioural Heterogeneity under Evolutionary Pressure: Macroeconomic Implications of Costly Optimisation," Economic Journal, Royal Economic Society, vol. 105(430), pages 583-600, May.
    9. George W. Evans & Bruce McGough, 2007. "Representations and Sunspot Stability," University of Oregon Economics Department Working Papers 2007-1, University of Oregon Economics Department, revised 28 Aug 2008.
    10. Branch, William A. & Evans, George W., 2006. "Intrinsic heterogeneity in expectation formation," Journal of Economic Theory, Elsevier, vol. 127(1), pages 264-295, March.
    11. Woodford, Michael, 1990. "Learning to Believe in Sunspots," Econometrica, Econometric Society, vol. 58(2), pages 277-307, March.
    12. Branch, William A. & McGough, Bruce, 2008. "Replicator dynamics in a Cobweb model with rationally heterogeneous expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 65(2), pages 224-244, February.
    13. Berardi, Michele, 2009. "Heterogeneous expectations, sunspot equilibria and their fragility," Economics Letters, Elsevier, vol. 105(3), pages 276-279, December.
    14. Berardi, Michele, 2011. "Fundamentalists vs. chartists: Learning and predictor choice dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 35(5), pages 776-792, May.
    15. Evans, George W. & Honkapohja, Seppo & Honkapohja, Seppo, 1994. "Learning, convergence, and stability with multiple rational expectations equilibria," European Economic Review, Elsevier, vol. 38(5), pages 1071-1098, May.
    16. T. Borgers & R. Sarin, 2010. "Learning Through Reinforcement and Replicator Dynamics," Levine's Working Paper Archive 380, David K. Levine.
    17. George W. Evans & Bruce McGough, 2002. "Stable Sunspot Solutions in Models with Predetermined Variables," University of Oregon Economics Department Working Papers 2002-16, University of Oregon Economics Department, revised 29 May 2003.
    18. Evans George W. & Honkapohja Seppo, 1994. "On the Local Stability of Sunspot Equilibria under Adaptive Learning Rules," Journal of Economic Theory, Elsevier, vol. 64(1), pages 142-161, October.
    19. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:man:cgbcrp:160. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marianne Sensier).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.