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Learning Stability in Economies with Heterogenous Agents

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Author Info
Honkapohja, Seppo
Mitra, Kaushik

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Abstract

An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. Various forms of structural heterogeneity can arise and we study the important case of economies in which agents' behavior depends on forecasts of aggregate variables and show how different forms of heterogeneity in structure, forecasts, and adaptive learning rules affect the conditions for convergence of adaptive learning towards rational expectations equilibrium. Results are applied to the market model with supply lags and a New Keynesian model of interest rate setting.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 772.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_772

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Related research
Keywords: adaptive learning; expectations formation; stability of equilibrium; market model; monetary policy.;

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Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation

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