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Agent-Based Learning in 'Islands' with 'Sticky Information': An Explanation for the Persistence of Real Effects

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  • Easaw, Joshy Z.
  • Ghoshray, Atanu

Abstract

This paper outlines a model where a household forms subjective expectations about his income by 'anchoring' on a professional's forecasts of the aggregate economy. Hence, the household is able to form relative (or real) income expectations. However, he observes the professional's forecasts imperfectly and only adjusts his expectations partially. Using the 'Lucas-Phelps Island' scenario, set in the context of households, we show how persistence of real effects could arise in such a scenario.

Suggested Citation

  • Easaw, Joshy Z. & Ghoshray, Atanu, 2006. "Agent-Based Learning in 'Islands' with 'Sticky Information': An Explanation for the Persistence of Real Effects," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 263-268, February.
    • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:1:p:263-268
    DOI: 10.1353/mcb.2006.0015
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    Cited by:

    1. Carrera Cesar, 2012. "Estimating Information Rigidity Using Firms' Survey Data," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-34, June.
    2. Reid, Monique, 2015. "Inflation expectations of the inattentive general public," Economic Modelling, Elsevier, vol. 46(C), pages 157-166.

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