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Learning Dynamics: Complete and Incomplete Learning

In: Advances in Macroeconomic Theory

Author

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  • Seppo Honkapohja

    (University of Helsinki)

Abstract

Rational expectations (RE) is currently the standard approach to modelling expectations in macroeconomics. However, refinements to modelling expectations formation have recently been developed and the literature on learning dynamics has grown rapidly. The basic idea in models of learning is that agents have limited information about the structure of the economy and they have to act inductively like scientists when they forecast the relevant aspects of its future course. Some forecasting is necessary since, as is common in economics, the decisions of individual agents depend on the future and these agents are forward looking in their decision-making. The RE hypothesis is weakened to the assumption that expectations follow a real-time learning rule which often will make expectations converge to RE over time.

Suggested Citation

  • Seppo Honkapohja, 2001. "Learning Dynamics: Complete and Incomplete Learning," International Economic Association Series, in: Jacques Drèze (ed.), Advances in Macroeconomic Theory, chapter 12, pages 239-254, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-0-333-99275-3_12
    DOI: 10.1057/9780333992753_12
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    Cited by:

    1. Baranowski, Ryan, 2015. "Adaptive learning and monetary exchange," Journal of Economic Dynamics and Control, Elsevier, vol. 58(C), pages 1-18.
    2. repec:zbw:bofrdp:2007_032 is not listed on IDEAS
    3. Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Joseph E. Stiglitz & Tania Treibich, 2020. "Rational Heuristics? Expectations And Behaviors In Evolving Economies With Heterogeneous Interacting Agents," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1487-1516, July.
    4. repec:hal:spmain:info:hdl:2441/31dhti786q9k0q2i04klh6no54 is not listed on IDEAS
    5. Boz, Emine & Mendoza, Enrique G., 2014. "Financial innovation, the discovery of risk, and the U.S. credit crisis," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 1-22.
    6. George W. Evans & Seppo Honkapohja, 2009. "Expectations, Learning and Monetary Policy: An Overview of Recent Research," Central Banking, Analysis, and Economic Policies Book Series, in: Klaus Schmidt-Hebbel & Carl E. Walsh & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.),Monetary Policy under Uncertainty and Learning, edition 1, volume 13, chapter 2, pages 027-076, Central Bank of Chile.
    7. Chatterji, Shurojit & Lobato, Ignacio N., 2015. "On divergent dynamics with ordinary least squares learning," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 1-9.
    8. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.
    9. Best, Gabriela, 2015. "A New Keynesian model with staggered price and wage setting under learning," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 96-111.
    10. Chiarella, Carl & He, Xue-Zhong, 2003. "Dynamics of beliefs and learning under aL-processes -- the heterogeneous case," Journal of Economic Dynamics and Control, Elsevier, vol. 27(3), pages 503-531, January.
    11. repec:spo:wpmain:info:hdl:2441/31dhti786q9k0q2i04klh6no54 is not listed on IDEAS
    12. Julien, Ludovic A., 2003. "Chômage d’équilibre, équilibres multiples et défauts de coordination," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(4), pages 523-562, Décembre.
    13. Robert Somogyi & Janos Vincze, 2011. "Price Rigidity and Strategic Uncertainty An Agent-based Approach," CERS-IE WORKING PAPERS 1135, Institute of Economics, Centre for Economic and Regional Studies.

    More about this item

    Keywords

    Rational Expectation; Phillips Curve; Productivity Shock; Rational Expectation; Learn Dynamics;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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