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Learning Stability in Economies with Heterogenous Agents

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Author Info
Kaushik Mitra ()
Seppo Honkapohja (Department of Economics, Royal Holloway, University of London)

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Abstract

An economy exhibits structural heterogeneity when the forecasts of di?erent agents have different effects on the determination of aggregate variables. We study the important case of economies in which agents’ behavior depends on forecasts of aggregate variables and show how di?erent forms of heterogeneity in structure, forecasts, and adaptive learning rules a?ect the conditions for convergence of adaptive learning towards rational expectations equilibrium. Results are applied to a market model with speculative demand and a New Keynesian model of interest rate setting.

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Publisher Info
Paper provided by Department of Economics, Royal Holloway University of London in its series Royal Holloway, University of London: Discussion Papers in Economics with number 04/17.

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Length: 30 pages
Date of creation: Jul 2004
Date of revision: Jul 2004
Handle: RePEc:hol:holodi:0417

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Related research
Keywords: Adaptive learning; expectations formation; stability of equilibrium; market model; inflation; monetary policy;

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Find related papers by JEL classification:
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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References listed on IDEAS
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