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...

In this paper we provide an explicit characterization of the escape dynamics for the Phellps problem of government controlling inflation with adaptive learning of the approximate Phillips curve, alternative to the one considered by Cho, Williams and Sargent (2002) (CWS in sequel). Our approach...

In this paper we provide an explicit characterization of the escape dynamics for the Phellps problem of government controlling inflation with adaptive learning of the approximate Phillips curve, alternative to the one considered by Cho, Williams and Sargent (2002) (CWS in sequel). Our approach...

We use a continuous-time approximation approach to analyze dynamics of a model where government adaptively learns the Phillips curve while running monetary policy (Phellps problem). This approach is based on approximating the discrete-time dynamics with learning by a limiting continuous-time...

In this paper we provide explicit characterization of the escape dynamics for the Phellps problem of government controlling inflation with adaptive learning of the approximate Phillips curve, alternative to the one considered by Cho, Williams and Sargent (2002). Our approach is based on...

We introduce the concept of a Misspecification Equilibrium to dynamic macroeconomics. Agents choose between a list of misspecified econometric models and base their selection on relative forecast performance. A Misspecification Equilibrium is an equilibrium stochastic process in which agents...

This paper identifies two channels through which the economy can generate endogenous inflation and output volatility, an empirical regularity, by introducing model uncertainty into a Lucas-type monetary model. The equilibrium path of inflation depends on agents' expectations and a vector of...

In this paper we consider regression models with forecast feedback. Agents' expectations are formed via the recursive estimation of the parameters in an auxiliary model. The learning scheme employed by the agents belongs to the class of stochastic approximation algorithms whose gain sequence is...

This discussion paper led to an article in 'Journal of Economic Theory' (2014). Volume 150, pp. 778-814.<P> We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high...</p>

This paper examines the government spending multiplier when economic agents form their expectations based on an adaptive learning scheme. The learning mechanism is such that the agents forecast future values of forward-looking variables using a linear function of an information set that does not...