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Learnability of an equilibrium with private information

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  • Nakagawa, Ryuichi

Abstract

This paper investigates the learnability of an equilibrium with private information. Agents of each type have their own private information about an exogenous variable and conduct adaptive learning with a heterogeneously misspecified perceived laws of motion (PLM) that includes only this variable. The paper shows that the existence of private information has a nonnegative impact on the learnability of the equilibrium; that is, the condition for learnability is unaffected or relaxed by heterogeneity and/or misspecification in PLMs caused by private information. In a New Keynesian model with private information about fundamental shocks, the learnability of the equilibrium is ensured by the Taylor principle of monetary policy. The paper also confirms that these results hold true not only in the presence of private information, but also in a variety of informational structures.

Suggested Citation

  • Nakagawa, Ryuichi, 2015. "Learnability of an equilibrium with private information," Journal of Economic Dynamics and Control, Elsevier, vol. 59(C), pages 58-74.
  • Handle: RePEc:eee:dyncon:v:59:y:2015:i:c:p:58-74
    DOI: 10.1016/j.jedc.2015.06.010
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    Cited by:

    1. Bruce McGough & Ryuichi Nakagawa, 2019. "Stability of Sunspot Equilibria under Adaptive Learning with Imperfect Information," Working Papers on Central Bank Communication 005, University of Tokyo, Graduate School of Economics.

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    More about this item

    Keywords

    Adaptive learning; Private information; Heterogeneous misspecification; Taylor principle;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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