IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v60y1993i1p197-208..html
   My bibliography  Save this article

Least-Squares Learning and the Stability of Equilibria with Externalities

Author

Listed:
  • Bartholomew J. Moore

Abstract

This paper studies the stability of competitive equilibria in a model of aggregate employment when the representative agent uses a least-squares forecasting procedure. It is shown that the Pareto inferior low employment steady state is always unstable under least-squares learning, even if it is stable under perfect foresight. The high employment steady state is stable under learning if and only if it is saddle point stable under perfect foresight. This weakens multiple equilibrium theories of coordination failure that purport to explain persistently high unemployment. The Pareto superior high employment steady state will be the focal point of individual forecasting.

Suggested Citation

  • Bartholomew J. Moore, 1993. "Least-Squares Learning and the Stability of Equilibria with Externalities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 197-208.
    • Handle: RePEc:oup:restud:v:60:y:1993:i:1:p:197-208.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2307/2297818
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

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


    Cited by:

    1. Kiminori Matsuyama & Takaaki Takahashi, 1998. "Self-Defeating Regional Concentration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 211-234.
    2. Gauthier, Stephane, 2001. "Learning and the saddle point property," Economics Letters, Elsevier, vol. 73(3), pages 339-343, December.
    3. Walde, Klaus, 2002. "The economic determinants of technology shocks in a real business cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 1-28, November.

    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:oup:restud:v:60:y:1993:i:1:p:197-208.. 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: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/restud .

    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.