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Empirical calibration of adaptive learning

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  • Berardi, Michele
  • Galimberti, Jaqueson K.

Abstract

Adaptive learning introduces persistence in the evolution of agents’ beliefs over time, helping explain why economies present sluggish adjustments towards equilibrium. The pace of this learning process is directly determined by the gain parameter. We document and evaluate gain calibrations for a broad range of model specifications with macroeconomic data, also developing alternative approaches to the endogenous determination of time-varying gains in real-time. Our key findings are that learning gains are higher for inflation than for output growth and interest rates, and that calibrations to match survey forecasts are lower than those derived according to forecasting performance, suggesting some degree of bounded rationality in the speed with which agents update their beliefs.

Suggested Citation

  • Berardi, Michele & Galimberti, Jaqueson K., 2017. "Empirical calibration of adaptive learning," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 219-237.
  • Handle: RePEc:eee:jeborg:v:144:y:2017:i:c:p:219-237
    DOI: 10.1016/j.jebo.2017.10.004
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    Cited by:

    1. Michele Berardi, 2018. "Information aggregation and learning in a dynamic asset pricing model," Centre for Growth and Business Cycle Research Discussion Paper Series 241, Economics, The Univeristy of Manchester.
    2. Michele Berardi, 2016. "Herding through learning in an asset pricing model," Centre for Growth and Business Cycle Research Discussion Paper Series 223, Economics, The Univeristy of Manchester.

    More about this item

    Keywords

    Bounded rationality; Expectations; Forecasting; Real-time data; Recursive estimation;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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