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Learning stability in economics with heterogeneous agents

  • Honkapohja, Seppo
  • Mitra, Kaushik

An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. We study 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 the market model with supply lags, a New Keynesian model of interest rate setting and the monetary inflation model with heterogenous agents. JEL Classification: D83, C62, E30

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Paper provided by European Central Bank in its series Working Paper Series with number 0120.

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Date of creation: Jan 2002
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Handle: RePEc:ecb:ecbwps:20020120
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  13. Honkapohja, S. & Mitra, K., 1999. "Learning with Bounded Memory in Stochastic Models," University of Helsinki, Department of Economics 456, Department of Economics.
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  30. Thomas J. Sargent & Noah William, 2005. "Impacts of Priors on Convergence and Escapes from Nash Inflation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 360-391, April.
  31. Evans, George W. & Honkapohja, Seppo & Sargent, Thomas J., 1993. "On the preservation of deterministic cycles when some agents perceive them to be random fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 705-721.
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