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Economic Dynamics Under Heterogeneous Learning: Necessary and Sufficient Conditions for Stability

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  • Dmitri Kolyuzhnov

Abstract

I provide sufficient conditions and necessary conditions for stability of a structurally heterogeneous economy under heterogeneous learning of agents. These conditions are written in terms of the structural heterogeneity independent of heterogeneity in learning. I have found an easily interpretable unifying condition which is sufficient for convergence of an economy under mixed RLS/SG learning with different degrees of inertia towards a rational expectations equilibrium for a broad class of economic models and a criterion for such a convergence in the univariate case. The conditions are formulated using the concept of a subeconomy and a suitably defined aggregate economy. I demonstrate and provide interpretation of the derived conditions and the criterion on univariate and multivariate examples, including two specifications of the overlapping generations model and the model of simultaneous markets with structural heterogeneity.

Suggested Citation

  • Dmitri Kolyuzhnov, 2008. "Economic Dynamics Under Heterogeneous Learning: Necessary and Sufficient Conditions for Stability," CERGE-EI Working Papers wp378, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp378
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    References listed on IDEAS

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    1. Johnson, Charles R., 1974. "Sufficient conditions for D-stability," Journal of Economic Theory, Elsevier, vol. 9(1), pages 53-62, September.
    2. George W. Evans & Seppo Honkapohja & Noah Williams, 2010. "Generalized Stochastic Gradient Learning," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 237-262, February.
    3. 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.
    4. Chryssi Giannitsarou, 2003. "Heterogeneous Learning," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 885-906, October.
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    More about this item

    Keywords

    Adaptive learning; stability of equilibrium; heterogeneous agents.;
    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
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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