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Learning Within Rational-Expectations Equilibrium

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  • Thomas Norman

Abstract

Models of macroeconomic learning are populated by agents who possess a great deal of knowledge of the "true" structure of the economy, and yet ignore the impact of their own learning on that structure; they may learn about an equilibrium, but they do not learn within it.� An alternative learning model is presented where agents' decisions are informed by hypotheses they hold regarding the economy.� They periodically test these hypotheses against observed data, and replace them if they fail.� It is shown that agents who learn in this way spend almost all of the time approximating rational-expectations equilibria.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 591.

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Date of creation: 01 Jan 2012
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Handle: RePEc:oxf:wpaper:591

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Keywords: Rational-expectations equilibrium; Learning; Hypothesis testing;

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  1. John H. Nachbar, 1997. "Prediction, Optimization, and Learning in Repeated Games," Econometrica, Econometric Society, Econometric Society, vol. 65(2), pages 275-310, March.
  2. Evans, George W. & Honkapohja, Seppo, 1999. "Learning dynamics," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 7, pages 449-542 Elsevier.
  3. Blume, Lawrence E. & Easley, David, 1982. "Learning to be rational," Journal of Economic Theory, Elsevier, Elsevier, vol. 26(2), pages 340-351, April.
  4. Sergiu Hart & Andreu Mas-Colell, 2002. "Uncoupled dynamics cannot lead to Nash equilibrium," Discussion Paper Series, The Center for the Study of Rationality, Hebrew University, Jerusalem dp299, The Center for the Study of Rationality, Hebrew University, Jerusalem.
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