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Intrinsic Heterogeneity in Expectation Formation Author info | Abstract | Publisher info | Download info | Related research | Statistics Bill Branch (College of William and Mary)
George W. Evans () (University of Oregon Economics Department)
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We introduce the concept of a Misspecification Equilibrium to dynamic macroeconomics. Agents choose between a list of misspecified econometric models and base their selection on relative forecast performance. A Misspecification Equilibrium is an equilibrium stochastic process in which agents forecast optimally given their choices, with the forecasting model parameters and predictor proportions endogenously determined. For appropriate conditions on the exogenous driving process and the degree of feedback of expectations, the Misspecification Equilibrium will exhibit Intrinsic Heterogeneity. With Intrinsic Heterogeneity more than one misspecified model receives positive weight in the distribution of predictors across agents, even in the neoclassical limit in which only the most successful predictors are used.
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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number
2003-32.
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Length: 30
Date of creation: 16 May 2003Date of revision:
04 Oct 2004Handle: RePEc:ore:uoecwp:2003-32Contact details of provider: Postal: 1285 University of Oregon, 435 PLC, Eugene, OR 97403-1285 Phone: (541) 346-4661 Fax: (541) 346-1243 Email: Web page: http://economics.uoregon.edu/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Bill Harbaugh).
Keywords: Cobweb model ; heterogeneous beliefs ; adaptive learning ; 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 D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
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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.: Brock, William A. & Hommes, Cars H., 1998.
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"Adaptive Expectations, Underparameterization and the Lucas Critique ,"
University of California at San Diego, Economics Working Paper Series
2001-11, Department of Economics, UC San Diego.
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George W. Evans & Garey Ramey, 2001.
""Adaptive Expectations, Underparameterization and the Lucas Critique ,"
University of Oregon Economics Department Working Papers
2001-8, University of Oregon Economics Department, revised 01 Dec 2004.
[Downloadable!] Evans, George W. & Ramey, Garey, 2006.
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Journal of Monetary Economics ,
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Haltiwanger, John C & Waldman, Michael, 1989.
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repec:att:wimass:199624 is not listed on IDEAS
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references Cited by : (explanations , 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.)
James B. Bullard, 2006.
"The learnability criterion and monetary policy ,"
Review ,
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Paul De Grauwe, 2008.
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"Animal Spirits and Monetary Policy ,"
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Anufriev, M. & Assenza, T. & Hommes, C.H. & Massaro, D., 2008.
"Interest Rate Rules with Heterogeneous Expectations ,"
CeNDEF Working Papers
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Wiliam Branch & George W. Evans, 2006.
"Asset Return Dynamics and Learning ,"
University of Oregon Economics Department Working Papers
2006-14, University of Oregon Economics Department.
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Alex Brazier & Richard Harrison & Mervyn King & Tony Yates, 2008.
"The Danger of Inflating Expectations of Macroeconomic Stability: Heuristic Switching in an Overlapping-Generations Monetary Model ,"
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Other versions: William Brock & Cars Hommes & Florian Wagener, 2006.
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06-080/1, Tinbergen Institute, revised 30 Apr 2008.
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Other versions:
Florian Wagener & Cars Hommes & William Brock, 2006.
"More hedging instruments may destabilize markets ,"
Working Papers
wp06-11, Warwick Business School, Financial Econometrics Research Centre.
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"More hedging instruments may destabilize markets ,"
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06-12, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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"More hedging instruments may destabilize markets ,"
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[Downloadable!] (restricted) Domenico Colucci & Vincenzo Valori, 2009.
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2009-01, Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze.
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Gaetano Gaballo, 2008.
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Evans , George W & Honkapohja, Seppo, 2007.
"Expectations, learning and monetary policy: an overview of recent research ,"
Research Discussion Papers
32/2007, Bank of Finland.
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George Evans & Seppo Honkapohja, 2008.
" Expectations, Learning and Monetary Policy: An Overview of Recent Research ,"
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[Downloadable!] George W. Evans & Seppo Honkapohja, 2008.
"Expectations, Learning, And Monetary Policy: An Overview Of Recent Research ,"
Working Papers Central Bank of Chile
501, Central Bank of Chile.
[Downloadable!] Evans, George W & Honkapohja, Seppo, 2008.
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CEPR Discussion Papers
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[Downloadable!] (restricted) Jasmina Arifovic & James B. Bullard & Olena Kostyshyna, 2007.
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2007-007, Federal Reserve Bank of St. Louis.
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Granato, J. & Guse, E. & Sunny Wong, M.C., 2006.
"Learning from the Expectations of Others ,"
Cambridge Working Papers in Economics
0605, Faculty of Economics, University of Cambridge.
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Jim Granato & Eran Guse & Sunny Wong, 2006.
"Learning From the Expectations of Others ,"
Computing in Economics and Finance 2006
449, Society for Computational Economics.
Granato, Jim & Guse, Eran A. & Wong, M. C. Sunny, 2008.
"Learning From The Expectations Of Others ,"
Macroeconomic Dynamics ,
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"Model Uncertainty and Endogenous Volatility ,"
University of Oregon Economics Department Working Papers
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"Bounded Rationality and Learning in Complex Markets ,"
CeNDEF Working Papers
07-01, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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George W. Evans & Seppo Honkapohja, 2008.
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repec:bep:maccon:v:4:y:2004:i:1:p:1197-1197 is not listed on IDEAS
Paul De Grauwe, 2008.
"Macroeconomic Modeling when Agents are Imperfectly Informed ,"
CESifo Working Paper Series
CESifo Working Paper No. , CESifo Group Munich.
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Mikhail Anufriev & Tiziana Assenza & Cars Hommes & Domenico Massaro, .
"Interest Rate Rules and Macroeconomic Stability under Heterogeneous Expectations ,"
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Pfajfar, D. & Zakelj, B., 2009.
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