We explore alternative approaches to numerical solutions of large rational expectations models. We discuss and compare several current alternatives, focussing on the tradeoffs in accuracy, space, and speed. The models range from representative agent models with many goods and capital stocks, to...

We study the properties of generalized stochastic gradient (GSG) learning in forward-looking models. We examine how the conditions for stability of standard stochastic gradient (SG) learning both differ from and are related to E-stability, which governs stability under least squares learning. SG...

This paper investigates the role that imperfect knowledge about the structure of the economy plays in the formation of expectations, macroeconomic dynamics, and the efficient formulation of monetary policy. Economic agents rely on an adaptive learning technology to form expectations and to...

This paper investigates what features of an economy determine whether convergence under learning is fast or slow. In all of the models that we consider, people's beliefs about model outcomes are central determinants of those outcomes. We argue that under certain circumstances, convergence of a...

This paper tests the joint hypothesis of rational expectations and the expectations model of the term structure for three- and six-month Treasury bills. Previous studies are extended in three directions. First, common efficient markets-rational expectations tests are compared, and it is shown...

We examine the role of generalized constant gain stochastic gradient (SGCG) learning in generating large deviations of an endogenous variable from its rational expectations value. We show analytically that these large deviations can occur with a frequency associated with a fat tailed...

Sticky-price models with rational expectations fail to capture the inertia in U.S. inflation. Models with backward-looking expectations capture current inflation behavior, but are unlikely to fit other monetary regimes. This paper seeks to overcome these problems with a near-rational model of...

We investigate the Expectations Hypotheses of the term structure of interest rates and of the foreign exchange market using vector autoregressive methods for the U.S. dollar, Deutsche mark, and British pound interest rates and exchange rates. In addition to standard Wald tests, we formulate...