Showing 1 - 10 of 45
We examine global economic dynamics under infinite-horizon learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. As in Evans, Guse and Honkapohja (2008), we find that under normal monetary and fiscal policy the intended steady state is locally but...
Persistent link: https://www.econbiz.de/10008692933
This paper considers the Ricardian Equivalence proposition when expectations are not rational and are instead formed using adaptive learning rules. We show that Ricardian Equivalence continues to hold provided suitable additional conditions on learning dynamics are satisfied. However, new cases...
Persistent link: https://www.econbiz.de/10008692942
We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead...
Persistent link: https://www.econbiz.de/10005763180
We consider inflation and government debt dynamics when monetary policy employs a global interest rate rule and private agents forecast using adaptive learning. Because of the zero lower bound on interest rates, active interest rate rules are known to imply the existence of a second, low...
Persistent link: https://www.econbiz.de/10005763186
We investigate both the rational explosive inflation paths studied by (McCallum 2001), and the classification of fiscal and monetary polices proposed by (Leeper 1991), for stability under learning of the rational expectations equilibria (REE). Our first result is that the fiscalist REE in the...
Persistent link: https://www.econbiz.de/10005763191
We consider the stability under adaptive learning of the complete set of solutions to the model x_i=beta(Ei*)(x_i+1) when |beat| 1. In addition to the fundamentals solution, the literature describes both finite-state Markov sunspot solutions and autoregressive solutions depending on an arbitrary...
Persistent link: https://www.econbiz.de/10005763194
We consider the impact of anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations. To model this we assume that agents combine limited structural knowledge with a standard adaptive learning rule. We analyze these issues using two...
Persistent link: https://www.econbiz.de/10005051491
We introduce the E-correspondence principle for stochastic dynamic expectations models as a tool for comparative dynamics analysis. The principle is applicable to equilibria that are stable under least squares and closely related learning rules. With this technique it is possible to study,...
Persistent link: https://www.econbiz.de/10005464099
Earlier studies of the seigniorage inflation model have found that the high-inflation steady state is not stable under adaptive learning. We reconsider this issue and analyze the full set of solutions for the linearized model. Our main focus is on stationary hyperinflationary paths near the...
Persistent link: https://www.econbiz.de/10005464104
We examine the nonlinear model x_t = E_t F(x_(t+1)). Markov SSEs exist near an indeterminate steady state, hat(x)=F(hat(x)), provided |F'(hat(x)| 1. Despite the importance of indeterminancy in macroeconomics, earlier results have not provided conditions for the existance of adaptively stable...
Persistent link: https://www.econbiz.de/10005593734