Representations and Sunspot Stability
AbstractBy endowing his agents with simple forecasting models, or representations, Woodford (1990) found that finite state Markov sunspot equilibria may be stable under learning. We show that common factor representations generalize to all sunspot equilibria the representations used by Woodford (1990). We find that if finite state Markov sunspots are stable under learning then all sunspots are stable under learning, provided common factor representations are used.
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Bibliographic InfoPaper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2007-1.
Date of creation: 01 Jan 2007
Date of revision: 28 Aug 2008
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Indeterminacy; Sunspot Equilibria; E-stability;
Other versions of this item:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-03 (All new papers)
- NEP-CBA-2007-02-03 (Central Banking)
- NEP-MAC-2007-02-03 (Macroeconomics)
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- Michele Berardi, 2013. "On the fragility of sunspot equilibria under learning and evolutionary dynamics," Centre for Growth and Business Cycle Research Discussion Paper Series 186, Economics, The Univeristy of Manchester.
- Gaballo, Gaetano, 2013.
"Good luck or good policy? An expectational theory of macro volatility switches,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 37(12), pages 2755-2770.
- Gaballo, G., 2012. "Good Luck or Good Policy? An Expectational Theory of Macro-Volatility Switches," Working papers 402, Banque de France.
- Michele Berardi, 2011. "Heterogeneous sunspots solutions under learning and replicator dynamics," Centre for Growth and Business Cycle Research Discussion Paper Series 160, Economics, The Univeristy of Manchester.
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