Advanced Search
MyIDEAS: Login to save this paper or follow this series

A rational expectatons critque of the Hahn-Solow critique of rational expectations

Contents:

Author Info

  • Richard E. Hawkins
Registered author(s):

    Abstract

    Solow and Hahn proposed an overlapping generations model in 1995 with which to criticize rational expectations. The agents have perfect foresight, but are subjected to an unanticipated shock in the population. The authors showed that the economy couldn't return to the steady state without monetary intervention. While the model is used to criticize rational expectations, it relies on the straw man of an unanticipated surprise, leaving the agents no possibility of adapting--the critique relies upon a model which lacks the fundamental characteristics of rational expectations. The model is revisited with a Rational Expectations model such that the possibility of a shock in each period is foreseen by agents, and used to form expectations. Rare and small increases and decreases in the population are both possible, with the log of population folowing a random walk, leaving only per capita capi tal as a state variable. While the model cannot be fully solved analytically, it can be solved far enough that complete soliton by high dimensional dynamic programming is possible. After analytic possibilities are exhausted, computation is used to find conditions in which the economy returns to the steady state following a shock, and those in which it diverges or enters a flip cycle--As the Clower constraint does not bind in all possible states of the world, the excess monetary holdings allow return to the steady state in some cases.

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 289.

    as in new window
    Length:
    Date of creation: 11 Aug 2004
    Date of revision:
    Handle: RePEc:sce:scecf4:289

    Contact details of provider:
    Email:
    Web page: http://comp-econ.org/
    More information through EDIRC

    Related research

    Keywords: rational expections; dynamic programming;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    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:sce:scecf4:289. 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: (Christopher F. Baum).

    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.