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Economic Dynamics with Learning: New Stability Results

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  • Seppo Honkapohja
  • George W. Evans

Abstract

Drawing upon recent contributions in the statistical literature, we present a new result on the convergence of recursive, stochastic algorithms which can be applied to eonomic models with learning. The formal result provides probability bounds for convergence which can be used to describe the local stability under learning of rational expectations equilibria. Our treatment also generalizes previous results by permitting the state variable to follow a nonlinear Markov process. Two economic applications are discussed.

Suggested Citation

  • Seppo Honkapohja & George W. Evans, 1996. "Economic Dynamics with Learning: New Stability Results," CESifo Working Paper Series 110, CESifo.
    • Handle: RePEc:ces:ceswps:_110
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