We explore the consequence of learning to forecast in a very simple environment. Agents have bounded memory and incorrectly believe that there is nonlinear structure underlying the aggregate time series dynamics. Under social learning with finite memory, agents may be unable to learn the true...

We consider a simple market environment in which traders with finite memory update forecasting rules at random intervals by OLS. In this context, changes in the perception of market risk can trigger volatility and bubbles. Consequently, higher degrees of risk response among traders can have a...

This note develops an efficiency wage model which displays persistent cycles under perfect foresight. Limit cycles arise from the dependence of current labor supply on both recent labor market conditions and the expected rate of job creation.

This paper considers the behavior of the exchange rate in a very simple artificial currency market with two currencies and artificial agents who evolve their forecast rules over time via a genetic algorithm. I consider two simple forecast rules, one linear and the other non-linear. Under the...

This paper offers a novel test of the credit view of the monetary policy transmission mechanism using stock market returns. We identify Fed policy shocks using newspaper accounts and track daily stock prices immediately following the shocks. If the credit channel is important, then firms that...