IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v5y2001i02p204-224_01.html
   My bibliography  Save this article

Performance Of Rational And Boundedly Rational Agents In A Model With Persistent Exchange-Rate Volatility

Author

Listed:
  • Arifovic, Jasmina

Abstract

The model is a two-country overlapping generations economy with boundedly rational agents who update their decision rules using a version of the stochastic replicator dynamic. The results show that stationary rational expectations equilibria of this model are unstable under this type of evolutionary adaptation. The paper also derives a two-period-ahead forecast of the values of average fractions of savings placed in each of the two currencies. This forecast is used in decisionmaking of a rational agent who has a full knowledge of the evolutionary economy. The performance of the rational agent is compared to the performance of boundedly rational agents, based on the average utility received over time. Results show that the difference between utilities earned by rational and boundedly rational agents is small. In addition, the average utility of the best-performing boundedly rational agents is higher than the average utility of the rational agents.

Suggested Citation

  • Arifovic, Jasmina, 2001. "Performance Of Rational And Boundedly Rational Agents In A Model With Persistent Exchange-Rate Volatility," Macroeconomic Dynamics, Cambridge University Press, vol. 5(02), pages 204-224, April.
    • Handle: RePEc:cup:macdyn:v:5:y:2001:i:02:p:204-224_01
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100501019046/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ryuichi YAMAMOTO, 2005. "Evolution with Individual and Social Learning in an Agent-Based Stock Market," Computing in Economics and Finance 2005 228, Society for Computational Economics.
    2. LeBaron, Blake, 2006. "Agent-based Computational Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 24, pages 1187-1233, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:5:y:2001:i:02:p:204-224_01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.