Time-Varying Parameters and Endogenous Learning Algorithms
AbstractThe adaptive learning has primarily focused on decreasing gain learning and constant gain learning. As pointed out theoretically by Marcet and Nicolini (2003) and empirically by Milani (2007) an endogenous learning mechanism may explain key economic behaviors, such as recurrent hyperinflation or time varying volatility. This paper evaluates the mechanism used in those papers in addition to proposing an alternative endogenous learning algorithm. The proposed algorithm outperforms the Marcet and Nicolini's algorithm in simulations and may result in exotic dynamics.
Download InfoIf 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.
Bibliographic InfoPaper provided by Ursinus College, Department of Economics in its series Working Papers with number 13-02.
Date of creation: 01 Mar 2013
Date of revision:
Learning; Rational Expectations; Endogenous Learning;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-24 (All new papers)
- NEP-CMP-2013-06-24 (Computational Economics)
- NEP-MAC-2013-06-24 (Macroeconomics)
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.:
- 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.
- Evans, George W. & Ramey, Garey, 2006. "Adaptive expectations, underparameterization and the Lucas critique," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 249-264, March.
- Evans, George W & Ramey, Garey, 2001. "Adaptive Expectations, Underparameterization and the Lucas Critique," University of California at San Diego, Economics Working Paper Series qt41f2h196, Department of Economics, UC San Diego.
- Fabio Milani, 2007. "Learning and Time-Varying Macroeconomic Volatility," Working Papers 070802, University of California-Irvine, Department of Economics.
- McCallum, Bennett T., 1983.
"On non-uniqueness in rational expectations models : An attempt at perspective,"
Journal of Monetary Economics,
Elsevier, vol. 11(2), pages 139-168.
- 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.
- Eric Gaus, 2012. "Robust Stability of Monetary Policy Rules under Adaptive Learning," Working Papers 13-01, Ursinus College, Department of Economics, revised 14 Dec 2012.
- John Duffy & Wei Xiao, 2007.
"The Value of Interest Rate Stabilization Policies When Agents Are Learning,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 39(8), pages 2041-2056, December.
- John Duffy & Wei Xiao, 2006. "The Value of Interest Rate Stabilization Policies When Agents are Learning," Working Papers 284, University of Pittsburgh, Department of Economics, revised Oct 2006.
- Duffy, John & Xiao, Wei, 2004. "The value of interest rate stabilization polices when agents are learning," Working Papers 2004-02, University of New Orleans, Department of Economics and Finance.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eric Gaus).
If references are entirely missing, you can add them using this form.