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Learning Within Rational-Expectations Equilibrium

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  • Thomas Norman

Abstract

Models of macroeconomic learning are populated by agents who possess a great deal of knowledge of the "true" structure of the economy, and yet ignore the impact of their own learning on that structure; they may learn about an equilibrium, but they do not learn within it. An alternative learning model is presented where agents' decisions are informed by hypotheses they hold regarding the economy. They periodically test these hypotheses against observed data, and replace them if they fail. It is shown that agents who learn in this way spend almost all of the time approximating rational-expectations equilibria.

Suggested Citation

  • Thomas Norman, 2012. "Learning Within Rational-Expectations Equilibrium," Economics Series Working Papers 591, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:591
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Rational-expectations equilibrium; Learning; Hypothesis testing;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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