Showing 1 - 9 of 9
We consider a linear univariate rational expectations model, with a predetermined variable, and study existence and stability of solutions driven by an extraneous finite-state Markov process. We show that when the model is indeterminate there exists a new class of k-state dependent sunspot...
Persistent link: https://www.econbiz.de/10005635127
A monopolist offers a product to a market of consumers with heterogeneous quality preferences. Although initially uninformed about the product quality, they learn by observing past purchase decisions and reviews of other consumers. Our goal is to analyze the social learning mechanism and its...
Persistent link: https://www.econbiz.de/10010905450
This paper demonstrates that an asset pricing model with least-squares learning can lead to bubbles and crashes as endogenous responses to the fundamentals driving asset prices. When agents are risk-averse they generate forecasts of the conditional variance of a stock's return. Recursive...
Persistent link: https://www.econbiz.de/10005763196
This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker's preferences for price vs. output stability, the learning...
Persistent link: https://www.econbiz.de/10005196104
This paper addresses the output-price volatility puzzle by studying the interaction of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs....
Persistent link: https://www.econbiz.de/10005593745
A monopolist offers a product to a market of consumers with heterogeneous quality preferences. Although initially uninformed about the product quality, they learn by observing past purchase decisions and reviews of other consumers. Our goal is to analyze the social learning mechanism and its...
Persistent link: https://www.econbiz.de/10010584157
An increasing proportion of transactions in two-sided markets are being mediated by online platforms. Presumably, agents choose to use online platforms because they have a lower transaction cost technology compared to alternatives. I use data from a growing online platform that matches travelers...
Persistent link: https://www.econbiz.de/10010584160
A striking implication of the replacement of adaptive expectations by Rational Expectations was the "Lucas Critique," which showed that expectation parameters, and endogenous variable dynamics, depend on policy parameters. We consider this issue from the vantage point of a bounded rationality,...
Persistent link: https://www.econbiz.de/10005635099
Under rational expectations and risk neutrality the linear projection of exchange rate change on the forward premium has a unit coefficient. However, empirical estimates of this coefficient are significantly less than one (and often negative). We investigate whether replacing rational...
Persistent link: https://www.econbiz.de/10005635112