"We study how the use of judgement or "add-factors" in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We isolate conditions under which new phenomena, which we call exuberance equilibria, can exist in standard macroeconomic...

The rational expectations hypothesis swept through macroeconomics during the 1970’s and permanently altered the landscape. It remains the prevailing paradigm in macroeconomics, and rational expectations is routinely used as the standard solution concept in both theoretical and applied...

We examine a certain nonlinear model. Markov SSEs exist near an indeterminate steady state. ... We show that there exist Markov SSEs, that are E-stable, and therefore locally stable under adaptive learning, ...

We consider the stability under adaptive learning of the complete set of solutions x1 = ßE1*x1+1 when /ß/1. In addition to the fundamentals solution, the literature describes both finite-state Markov sunspot solutions, satisfying a resonant frequency condition, and autoregressive solutions...