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Adaptive learning in models with lagged variables

  • Wilfredo Leiva
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    In this work I study the stability of the dynamics generated by adaptive learning processes in intertemporal economies with lagged variables. I prove that determinacy of the steady state is a necessary condition for the convergence of the learning dynamics and I show that the reciprocal is not true characterizing the economies where convergence holds. In the case of existence of cycles I show that there is not, in general, a relationship between determinacy and convergence of the learning process to the cycle. I also analyze the expectational stability of these equilibria.

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    File URL: http://www.econ.upf.edu/docs/papers/downloads/413.pdf
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    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 413.

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    Date of creation: Oct 1999
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    Handle: RePEc:upf:upfgen:413
    Contact details of provider: Web page: http://www.econ.upf.edu/

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    1. de Vilder, Robin, 1996. "Complicated Endogenous Business Cycles under Gross Substitutability," Journal of Economic Theory, Elsevier, vol. 71(2), pages 416-442, November.
    2. Reichlin, Pietro, 1986. "Equilibrium cycles in an overlapping generations economy with production," Journal of Economic Theory, Elsevier, vol. 40(1), pages 89-102, October.
    3. Michele Boldrin & Aldo Rustichini, 2010. "Growth and Indeterminacy in Dynamic Models with Externalities," Levine's Working Paper Archive 1382, David K. Levine.
    4. Woodford, Michael, 1986. "Stationary sunspot equilibria in a finance constrained economy," Journal of Economic Theory, Elsevier, vol. 40(1), pages 128-137, October.
    5. Chatterji Shurojit, 1995. "Temporary Equilibrium Dynamics with Bayesian Learning," Journal of Economic Theory, Elsevier, vol. 67(2), pages 590-598, December.
    6. Guesnerie, Roger, 1993. "Theoretical tests of the rational expectations hypothesis in economic dynamical models," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 847-864.
    7. Grandmont Jean-michel & Laroque Guy, 1985. "Stability of cycles and expectations," CEPREMAP Working Papers (Couverture Orange) 8519, CEPREMAP.
    8. Evans, George W & Honkapohja, Seppo, 1995. "Local Convergence of Recursive Learning to Steady States and Cycles in Stochastic Nonlinear Models," Econometrica, Econometric Society, vol. 63(1), pages 195-206, January.
    9. Grandmont, Jean-Michel, 1994. "Expectations formation and stability of large socioeconomic systems," CEPREMAP Working Papers (Couverture Orange) 9424, CEPREMAP.
    10. Farmer, Roger E. A., 1986. "Deficits and cycles," Journal of Economic Theory, Elsevier, vol. 40(1), pages 77-88, October.
    11. James Bullard, 1991. "Learning equilibria," Working Papers 1991-004, Federal Reserve Bank of St. Louis.
    12. Woodford, Michael, 1990. "Learning to Believe in Sunspots," Econometrica, Econometric Society, vol. 58(2), pages 277-307, March.
    13. Evans George W. & Honkapohja Seppo, 1994. "On the Local Stability of Sunspot Equilibria under Adaptive Learning Rules," Journal of Economic Theory, Elsevier, vol. 64(1), pages 142-161, October.
    14. Philippe Michel & Alain Venditti, 1997. "Optimal growth and cycles in overlapping generations models (*)," Economic Theory, Springer, vol. 9(3), pages 511-528.
    15. Hommes, Cars H., 1991. "Adaptive learning and roads to chaos : The case of the cobweb," Economics Letters, Elsevier, vol. 36(2), pages 127-132, June.
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