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Rational thinking under costly information—Macroeconomic implications

Listed author(s):
  • Gomes, Orlando

The notion of optimized rational behavior in the formation of expectations is used in this note to study the dynamics of a simple macroeconomic model. In a setting where departures from stability are not possible under perfect foresight, the selection of an optimal degree of rationality may lead to the generation of long-term endogenous fluctuations.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176511006252
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 115 (2012)
Issue (Month): 3 ()
Pages: 427-430

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Handle: RePEc:eee:ecolet:v:115:y:2012:i:3:p:427-430
DOI: 10.1016/j.econlet.2011.12.102
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Bullard James, 1994. "Learning Equilibria," Journal of Economic Theory, Elsevier, vol. 64(2), pages 468-485, December.
  2. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1295-1328.
  3. William Brock & Pietro Dindo & Cars Hommes, 2006. "Adaptive rational equilibrium with forward looking agents," International Journal of Economic Theory, The International Society for Economic Theory, vol. 2(3-4), pages 241-278.
  4. Schonhofer, Martin, 1999. "Chaotic Learning Equilibria," Journal of Economic Theory, Elsevier, vol. 89(1), pages 1-20, November.
  5. Darby, Michael R, 1976. "Rational Expectations under Conditions of Costly Information," Journal of Finance, American Finance Association, vol. 31(3), pages 889-895, June.
  6. Dudek, Maciej K., 2010. "A consistent route to randomness," Journal of Economic Theory, Elsevier, vol. 145(1), pages 354-381, January.
  7. Orlando Gomes, 2010. "Ordinary Least Squares Learning And Nonlinearities In Macroeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 52-84, 02.
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