IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Informational Fragility of Dynamic Rational Expectations Equilibria

Listed author(s):
  • Giacomo Rondina

    (University of California, San Diego)

We study the stability properties of Rational Expectations equilibria in dynamic models with incomplete information when the information set of agents is slightly perturbed. We show that equilibria where the endogenous variables resolve the information incompleteness can be informationally fragile, in the sense that a slight perturbation in the endogenous information set of the agents along the equilibrium path can lead to a break-down of the equilibrium dynamics. We then construct a class of dynamic rational expectations equilibria that are informationally stable for the same parameter space where other equilibria are informationally fragile. We show that an equilibrium that is informationally fragile is not least-squares learnable, while an equilibrium that is informationally stable always is. We finally present an application to a macroeconomic equilibrium model with productivity shocks and nominal rigidities under incomplete information that shows that both informationally fragile and stable equilibria can be obtained, with quite different shocks propagation properties.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 83.

in new window

Date of creation: 2013
Handle: RePEc:red:sed013:83
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page:

More information through EDIRC

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.:

in new window

  1. Guido Lorenzoni, 2009. "A Theory of Demand Shocks," American Economic Review, American Economic Association, vol. 99(5), pages 2050-2084, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed013:83. 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: (Christian Zimmermann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.