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E-stability in the Stochastic Ramsey Model

  • George W. Evans
  • Kaushik Mitra

Analytical expectational stability results are obtained for both Euler-equation and infinitehorizon adaptive learning in a simple stochastic growth model. The rational expectations equilibrium is stable under both types of learning, though there are differences in the learning dynamics.

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File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/wp1208.pdf
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Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 201209.

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Date of creation: 20 Sep 2012
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Handle: RePEc:san:cdmawp:1209
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  1. Fabio Milani, 2011. "Expectation Shocks and Learning as Drivers of the Business Cycle," Economic Journal, Royal Economic Society, vol. 121(552), pages 379-401, 05.
  2. McCallum, Bennett T., 2007. "E-stability vis-a-vis determinacy results for a broad class of linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1376-1391, April.
  3. Kaushik Mitra & George W. Evans & Seppo Honkapohja, 2011. "Policy Change and Learning in the RBC Model," CDMA Working Paper Series 201111, Centre for Dynamic Macroeconomic Analysis.
  4. Stefano Eusepi & Bruce Preston, 2008. "Expectations, Learning and Business Cycle Fluctuations," NBER Working Papers 14181, National Bureau of Economic Research, Inc.
  5. Gordon, Robert J, 1981. "Output Fluctuations and Gradual Price Adjustment," Journal of Economic Literature, American Economic Association, vol. 19(2), pages 493-530, June.
  6. Preston, Bruce, 2006. "Adaptive learning, forecast-based instrument rules and monetary policy," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 507-535, April.
  7. Evans, George W. & Honkapohja, Seppo & Mitra, Kaushik, 2010. "Does Ricardian Equivalence Hold When Expectations are not Rational?," CEPR Discussion Papers 7792, C.E.P.R. Discussion Papers.
  8. James B. Bullard & Kaushik Mitra, 2002. "Learning about monetary policy rules," Working Papers 2000-001, Federal Reserve Bank of St. Louis.
  9. Tim W. Cogley & Thomas J. Sargent, 2005. "Anticipated Utility and Rational Expectations as Approximations of Bayesian Decision Making," Working Papers 523, University of California, Davis, Department of Economics.
  10. Eusepi, Stefano, 2007. "Learnability and monetary policy: A global perspective," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1115-1131, May.
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