In a simple continuous-time model where the learning process affects the willingness to hold liquidity, we provide an intuitive explanation of business cycle asymmetry and post-crisis slow recovery. When observing a liquidity shock, individuals rationally increase their subjective probability of...

More formally, every machine learning algorithm depends on 3 things which need to be able to be programmed. First, there needs to exist an experience set, sometimes called a training set. This is data that the algorithm will “learn” from. Next, there needs to be some task, some action that...