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Comment on Assenza and Berardi "Learning in a Credit Economy" (2009, JEDC)

  • Pei Kuang

This comment shows that the "optimality" conditions in Assenza and Berardi (2009, JEDC) "Learning in a Credit Economy" imply that agents' "optimal" choices are either suboptimal or infeasible. It presents the correct optimality conditions and discusses the effect on the E-stability condition of the REE. In addition, the different dynamics under the two sets of conditions is illustrated by considering an unexpected productivity impulse. Finally, under heterogeneous learning rules, numerical simulations illustrate that bankruptcy on the part of the borrowers arises sooner as they track the economy faster.

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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/13-06.pdf
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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 13-06.

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Length: 17 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:bir:birmec:13-06
Contact details of provider: Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk

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  1. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
  2. Tiziana Assenzay & Michele Berardi, 2008. "Learning in a Credit Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 100, Economics, The Univeristy of Manchester.
  3. Pei Kuang, 2013. "Imperfect Knowledge about Asset Prices and Credit Cycles," Discussion Papers 13-02, Department of Economics, University of Birmingham.
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