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Temporary Eq'Uilibrium Dynamics With Bayesian Learning

Author

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  • Shurojit Chatterji

    (Centro de Investigación Económica, ITAM)

Abstract

This paper examines the stability of deterministic steady-states in a class of economies where the state -variable is one dimensional and where agents use Bayesian techniques to form expectations. Thr dynamics with learning are locally convergent if the prior mean is close to a stable perfect foresight root having modulus less than 1 and if the prior beliefs are held with enough confidence. Thr dynamics are however divergent if the prior mean or the variance of the prior distribution is sufficiently large.

Suggested Citation

  • Shurojit Chatterji, 1995. "Temporary Eq'Uilibrium Dynamics With Bayesian Learning," Working Papers. Serie AD 1995-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1995-09
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1995-09.pdf
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    Cited by:

    1. Wilfredo Leiva, 1999. "Adaptive learning in models with lagged variables," Economics Working Papers 413, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Chatterji, Shurojit, 2004. "Subjective temporary equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 28(9), pages 1757-1780, July.
    3. Shurojit Chatterji & Ignacio N. Lobato, 2010. "Transformations of the state variable and learning dynamics," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(4), pages 385-403, December.
    4. Araújo, Aloísio Pessoa de & Maldonado, Wilfredo Fernando Leiva, 2001. "A note on learning chaotic sunspot equilibrium," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 423, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

    More about this item

    Keywords

    Stability; Bayesian learning.;

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