Learning and expectations in macroeconomics
- ISBN: 9780691049212
- Editorial: Princeton University Press
- Fecha de la edición: 2001
- Lugar de la edición: New Jersey. None
- Encuadernación: Cartoné
- Medidas: 24 cm
- Nº Pág.: 424
- Idiomas: Inglés
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 expectation 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 that households and firms learn by making forecasts using observed data, updating their forecast rules over time in response to errors. This book is the first systematic development of the new statistical learning approach. Depending on the particular economic structure, the economy may converge to a standard rational-expectations or a "rational bubble" solution, or exhibit persistent learning dynamics.
Cover; Title; Copyright; Contents; Preface; Part I: View of the Landscape; 1 Expectations and the Learning Approach; 1.1 Expectations in Macroeconomics; 1.2 Two Examples; 1.3 Classical Models of Expectation Formation; 1.4 Learning: The New View of Expectations; 1.5 Statistical Approach to Learning; 1.6 A General Framework; 1.7 Overview of the Book;
2 Introduction to the Techniques; 2.1 Introduction; 2.2 The Cobweb Model; 2.3 Econometric Learning; 2.4 Expectational Stability; 2.5 Rational vs. Reasonable Learning; 2.6 Recursive Least Squares; 2.7 Convergence of Stochastic Recursive Algorithms. 2.8 Application to the Cobweb Model2.9 The E-Stability Principle; 2.10 Discussion of the Literature;
3 Variations on a Theme; 3.1 Introduction; 3.2 Heterogeneous Expectations; 3.3 Learning with Constant Gain; 3.4 Learning in Nonstochastic Models; 3.5 Stochastic Gradient Learning; 3.6 Learning with Misspecification;
4 Applications; 4.1 Introduction; 4.2 The Overlapping Generations Model; 4.3 A Linear Stochastic Macroeconomic Model; 4.4 The Ramsey Model; 4.5 The Diamond Growth Model; 4.6 A Model with Increasing Social Returns; 4.7 Other Models; 4.8 Appendix.
Part II: Mathematical Background and Tools
5 The Mathematical Background; 5.1 Introduction; 5.2 Difference Equations; 5.3 Differential Equations; 5.4 Linear Stochastic Processes; 5.5 Markov Processes; 5.6 Ito Processes; 5.7 Appendix on Matrix Algebra; 5.8 References for Mathematical Background;
6 Tools: Stochastic Approximation; 6.1 Introduction; 6.2 Stochastic Recursive Algorithms; 6.3 Convergence: The Basic Results; 6.4 Convergence: Further Discussion; 6.5 Instability Results; 6.6 Expectational Stability; 6.7 Global Convergence;
7 Further Topics in Stochastic Approximation; 7.1 Introduction. 7.2 Algorithms for Nonstochastic Frameworks7.3 The Case of Markovian State Dynamics; 7.4 Convergence Results for Constant-Gain Algorithms; 7.5 Gaussian Approximation for Cases of Decreasing Gain; 7.6 Global Convergence on Compact Domains; 7.7 Guide to the Technical Literature;
Part III: Learning in Linear Models;
8 Univariate Linear Models; 8.1 Introduction; 8.2 A Special Case; 8.3 E-Stability and Least Squares Learning: MSV Solutions; 8.4 E-Stability and Learning: The Full Class of Solutions; 8.5 Extension 1: Lagged Endogenous Variables; 8.6 Extension 2: Models with Time-t Dating. 8.7 Conclusions
9 Further Topics in Linear Models; 9.1 Introduction; 9.2 Muth's Inventory Model; 9.3 Overparameterization in the Special Case; 9.4 Extended Special Case; 9.5 Linear Model with Two Forward Leads; 9.6 Learning Explosive Solutions; 9.7 Bubbles in Asset Prices; 9.8 Heterogeneous Learning Rules;
10 Multivariate Linear Models; 10.1 Introduction; 10.2 MSV Solutions and Learning; 10.3 Models with Contemporaneous Expectations; 10.4 Real Business Cycle Model; 10.5 Irregular REE; 10.6 Conclusions; 10.7 Appendix 1: Linearizations; 10.8 Appendix 2: Solution Techniques
