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Learning Stability in Economies with Heterogenous Agents

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Abstract

An economy exhibits structural heterogeneity when the forecasts of di?erent agents have different effects on the determination of aggregate variables. We study the important case of economies in which agents’ behavior depends on forecasts of aggregate variables and show how di?erent forms of heterogeneity in structure, forecasts, and adaptive learning rules a?ect the conditions for convergence of adaptive learning towards rational expectations equilibrium. Results are applied to a market model with speculative demand and a New Keynesian model of interest rate setting.

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  • Kaushik Mitra & Seppo Honkapohja, 2004. "Learning Stability in Economies with Heterogenous Agents," Royal Holloway, University of London: Discussion Papers in Economics 04/17, Department of Economics, Royal Holloway University of London, revised Jul 2004.
    • Handle: RePEc:hol:holodi:0417
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    More about this item

    Keywords

    Adaptive learning; expectations formation; stability of equilibrium; market model; inflation; monetary policy;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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