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Instability Of Sunspot Equilibria In Real Business Cycle Models Under Infinite Horizon Learning

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  • Ji, Yangyang
  • Xiao, Wei

Abstract

This paper examines the stability of sunspot equilibria in one-sector RBC models under infinite horizon learning. We present general conditions under which the reduced-form model can possess E-stable sunspot equilibria and apply these conditions to three prominent one-sector RBC models. We find that the rational expectations sunspot equilibria are generally unstable under learning.

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  • Ji, Yangyang & Xiao, Wei, 2018. "Instability Of Sunspot Equilibria In Real Business Cycle Models Under Infinite Horizon Learning," Macroeconomic Dynamics, Cambridge University Press, vol. 22(8), pages 1978-2006, December.
    • Handle: RePEc:cup:macdyn:v:22:y:2018:i:08:p:1978-2006_00
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    Cited by:

    1. Wang, Hanjie & Feil, Jan-Henning & Yu, Xiaohua, 2021. "Disagreement on sunspots and soybeans futures price," Economic Modelling, Elsevier, vol. 95(C), pages 385-393.
    2. Bruce McGough & Ryuichi Nakagawa, 2019. "Stability of Sunspot Equilibria under Adaptive Learning with Imperfect Information," Working Papers on Central Bank Communication 005, University of Tokyo, Graduate School of Economics.

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