We study the impact of adaptive learning for the design of a robust monetary policy using a small open-economy New Keynesian model. We find that slightly departing from rational expectations substantially changes the way the central bank deals with model misspecification. Learning induces an...

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 chapter provides a survey of the recent work on learning in the context of macroeconomics. Learning has several roles. First, it provides a boundedly rational model of how rational expectations can be achieved. Secondly, learning acts as a selection device in models with multiple REE...

Adaptive learning under constant-gain allows persistent deviations of beliefs from equilibrium so as to more realistically reflect agents' attempt of tracking the continuous evolution of the economy. A characterization of these beliefs is therefore paramount to a proper understanding of the role...

This paper models expectation formation by taking into account that agents produce heterogeneous expectations due to model uncertainty, informational frictions and different capacities for processing information. We show that there are two general classes of steady states within this framework:...

This paper examines the ordinary least squares (OLS) estimator of the structural parameters in a class of stylised macroeconomic models in which agents are boundedly rational and use an adaptive learning rule to form expectations of the endogenous variable. The popularity of this type of model...

Explaining asset price booms poses a difficult question for researchers in macroeconomics: how can large and persistent price growth be explained in the absence large and persistent variation in fundamentals? This paper argues that boom-bust behavior in asset prices can be explained by a model...

Explaining asset price booms poses a difficult question for researchers in macroeconomics: how can large and persistent price growth be explained in the absence large and persistent variation in fundamentals? This paper argues that boom-bust behavior in asset prices can be explained by a model...

This paper brings novel insights into group coordination and price dynamics in complex environments. We implement an overlapping-generation model in the lab, where the output dynamics is given by the well-known chaotic quadratic map. This model structure allows us to study previously unexplored...