Impacts of priors on convergence and escapes from Nash inflation
Recent papers have analyzed how adaptive agents may converge to and escape from self-confirming equilibria. All of these papers have imputed to agents a particular prior about drifting coefficients. In the context of a model of monetary policy, this paper analyzes dynamics that govern both convergence and escape under a more general class of priors for the government. The authors characterize how the shape of the prior influences the dynamics in important ways. There are priors for which the E-stability condition is not enough to assure local convergence to a self-confirming equilibrium. Their analysis also tracks down the source of differences in the sustainability of Ramsey inflation encountered in the analyses of Sims (1988) and Chung (1990), on the one hand, and Cho, Williams, and Sargent (2002), on the other.
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.frbatlanta.org/Email:
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Drew Fudenberg & David K. Levine, 1998.
"Learning in Games,"
Levine's Working Paper Archive
2222, David K. Levine.
- Cho, In-Koo & Williams, Noah & Sargent, Thomas J, 2002.
"Escaping Nash Inflation,"
Review of Economic Studies,
Wiley Blackwell, vol. 69(1), pages 1-40, January.
- Bullard James, 1994.
Journal of Economic Theory,
Elsevier, vol. 64(2), pages 468-485, December.
- Christopher A. Sims & Tao Zha, 2006.
"Were There Regime Switches in U.S. Monetary Policy?,"
American Economic Review,
American Economic Association, vol. 96(1), pages 54-81, March.
- Christopher A. Sims & Tao Zha, 2005. "Were There Regime Switches in U.S. Monetary Policy?," Working Papers 92, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Christopher A. Sims & Tao Zha, 2004. "Were there regime switches in U.S. monetary policy?," Working Paper 2004-14, Federal Reserve Bank of Atlanta.
- Honkapohja, Seppo & Mitra, Kaushik, 2002.
"Learning stability in economics with heterogeneous agents,"
Working Paper Series
0120, European Central Bank.
- 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.
- Kaushik Mitra & Seppo Honkapohja, 2004. "Learning Stability in Economies with Heterogenous Agents," Royal Holloway, University of London: Discussion Papers in Economics 04/17, Department of Economics, Royal Holloway University of London, revised Jul 2004.
- Seppo Honkapohja & Kaushik Mitra, 2002. "Learning Stability in Economies with Heterogenous Agents," CESifo Working Paper Series 772, CESifo Group Munich.
- Timothy Cogley & Thomas J. Sargent, 2003.
"Drifts and volatilities: monetary policies and outcomes in the post WWII U.S,"
2003-25, Federal Reserve Bank of Atlanta.
- Timothy Cogley & Thomas J. Sargent, 2005. "Drift and Volatilities: Monetary Policies and Outcomes in the Post WWII U.S," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 262-302, April.
- Timothy Cogley & Thomas Sargent, . "Drifts and Volatilities: Monetary Policies and Outcomes in the Post WWII US," Working Papers 2133503, Department of Economics, W. P. Carey School of Business, Arizona State University.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, vol. 48(2), pages 337-368, August.
- Thomas Sargent & Noah Williams & Tao Zha, 2006.
"The Conquest of South American Inflation,"
NBER Working Papers
12606, National Bureau of Economic Research, Inc.
- M. I. Finley, 1958. "Note," Economic History Review, Economic History Society, vol. 11(1), pages 97-97, 08.
- William Poole, 2002. "Flation," Speech 49, Federal Reserve Bank of St. Louis.
When requesting a correction, please mention this item's handle: RePEc:fip:fedawp:2003-14. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector)
If references are entirely missing, you can add them using this form.