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Learning Stability in Economies with Heterogeneous Agents

Author

Listed:
  • Seppo Honkapohja

    (University of Cambridge)

  • Kaushik Mitra

    (University of St. Andrews)

Abstract

An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. We study the important case of economies in which agents' behavior depends on forecasts of aggregate variables and show how different forms of heterogeneity in structure, forecasts, and adaptive learning rules affect the conditions for convergence of adaptive learning towards rational expectations equilibrium. Results are applied to an overlapping generations model and a New Keynesian model of monetary policy. (Copyright: Elsevier)

Suggested Citation

  • Seppo Honkapohja & Kaushik Mitra, 2006. "Learning Stability in Economies with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 284-309, April.
    • Handle: RePEc:red:issued:v:9:y:2006:i:2:p:284-309
    DOI: 10.1016/j.red.2006.01.003
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    More about this item

    Keywords

    Adaptive learning; expectations formation; stability of equilibrium; overlapping generations model; inflation; monetary policy;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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