Learning and Expectations in Macroeconomics

Name: Learning and Expectations in Macroeconomics
Price: 56.63 USD
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ISBN: 9780691049212

ISBN-10: 0691049211

ISBN-13: 9780691049212

Edition: 2001

Authors: George W. Evans, Seppo Honkapohja

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Description:

A crucial challenge for economists is figuring out how people interpret the world and form expectations that will likely influence their economic activity. Inflation, asset prices, exchange rates, investment, and consumption are just some of the economic variables that are largely explained by expectations. Here George Evans and Seppo Honkapohja bring new explanatory power to a variety of expectation formation models by focusing on the learning factor. Whereas the rational expectations paradigm offers the prevailing method to determining expectations, it assumes very theoretical knowledge on the part of economic actors. Evans and Honkapohja contribute to a growing body of research positing…

Book details

List price: $95.00
Copyright year: 2001
Publisher: Princeton University Press
Publication date: 1/28/2001
Binding: Hardcover
Pages: 424
Size: 6.57" wide x 9.53" long x 1.27" tall
Weight: 1.694
Language: English



Preface



View of the Landscape



Expectations and the Learning Approach



Expectations in Macroeconomics



Two Examples



Classical Models of Expectation Formation



Learning: The New View of Expectations



Statistical Approach to Learning



A General Framework



Overview of the Book 19



Introduction to the Techniques



Introduction



The Cobweb Model



Econometric Learning



Expectational Stability



Rational vs. Reasonable Learning



Recursive Least Squares



Convergence of Stochastic Recursive Algorithms



Application to the Cobweb Model



The E-Stability Principle



Discussion of the Literature 43



Variations on a Theme



Introduction



Heterogeneous Expectations



Learning with Constant Gain



Learning in Nonstochastic Models



Stochastic Gradient Learning



Learning with Misspecification 56



Applications



Introduction



The Overlapping Generations Model



A Linear Stochastic Macroeconomic Model



The Ramsey Model



The Diamond Growth Model



A Model with Increasing Social Returns



Other Models



Appendix 82



Mathematical Background and Tools



The Mathematical Background



Introduction



Difference Equations



Differential Equations



Linear Stochastic Processes



Markov Processes



Ito Processes



Appendix on Matrix Algebra



References for Mathematical Background 118



Tools: Stochastic Approximation



Introduction



Stochastic Recursive Algorithms



Convergence: The Basic Results



Convergence: Further Discussion



Instability Results



Expectational Stability



Global Convergence 144



Further Topics in Stochastic Approximation



Introduction



Algorithms for Nonstochastic Frameworks



The Case of Markovian State Dynamics



Convergence Results for Constant-Gain Algorithms



Gaussian Approximation for Cases of Decreasing Gain



Global Convergence on Compact Domains



Guide to the Technical Literature 169



Learning in Linear Models



Univariate Linear Models



Introduction



A Special Case



E-Stability and Least Squares Learning: MSV Solutions



E-Stability and Learning: The Full Class of Solutions



Extension 1: Lagged Endogenous Variables



Extension 2: Models with Time-t Dating



Conclusions 204



Further Topics in Linear Models



Introduction



Muth's Inventory Model



Overparameterization in the Special Case



Extended Special Case



Linear Model with Two Forward Leads



Learning Explosive Solutions



Bubbles in Asset Prices



Heterogeneous Learning Rules 223



Multivariate Linear Models



Introduction



MSV Solutions and Learning



Models with Contemporaneous Expectations



Real Business Cycle Model



Irregular REE



Conclusions



Appendix 1: Linearizations



Appendix 2: Solution Techniques 252



Learning in Nonlinear Models Nonlinear Models: Steady States



Introduction



Equilibria under Perfect Foresight



Noisy Steady States



Adaptive Learning for Steady States



E-Stability and Learning



Applications 276



Cycles and Sunspot Equilibria



Introduction



Overview of Results



Deterministic Cycles



Noisy Cycles



Existence of Sunspot Equilibria



Learning SSEs



Global Analysis of Learning Dynamics



Conclusions 313



Further Topics 1