Under adaptive learning, recursive algorithms are proposed to represent how agents update their beliefs over time. For applied purposes these algorithms require initial estimates of agents perceived law of motion. Obtaining appropriate initial estimates can become prohibitive within the usual...

Previous literature has shown that, in a New Keynesian model, an expectations based policy rule induces E-stability of the fundamental equilibrium, while a fundamentals based one does not. We derive an alternative rule, based only on fundamentals, which can also achieve stability of equilibrium...

In this article, we investigate the possibility of sunspot equilibria to emerge from a process of learning and adaptation on agents’ beliefs. We consider both finite state Markov sunspots and sunspots in autoregressive form, and derive conditions for the existence of an heterogeneous...

In a simple, forward looking univariate model of price determination we investigate the evolution of endogenous predictor choice dynamics in presence of two types of agents: fundamentalists an chartists. We find that heterogeneous equilibria in which fundamentalists and chartists coexist are...

In a linear stochastic forward-looking univariate model with predetermined variables, we consider the possibility of heterogeneous equilibria with sunspots emerging endogenously through adaptive learning and replicator dynamics. In particular, we investigate equilibria where only a fraction of...

In a model of incomplete, heterogeneous information, with externalities and strategic interactions, we analyse the possibility of adaptive learning to act as coordination device. We build on the framework introduced by Angeletos and Pavan (2007) and extend it to a setting where agents need to...