This paper provides a concise primer on the estimation of constant gain learning models. One practical concern in the estimation procedure is the initialization of the learning parameters. The popular approach in the literature relies on a training sample to estimate these quantities. We also...

Modern Bayesian tools aided by MCMC techniques allow researchers to estimate models with increasingly intricate dynamics. This paper highlights the application of these tools with an empirical assessment of optimal versus operational monetary policy rules within a standard New Keynesian...

Recent research has explored how minor changes in expectation formation can change the stability properties of a model (Duffy and Xiao 2007, Evans and Honkapoja 2009). This paper builds on this research by examining an economy subject to a variety of monetary policy rules under an endogenous...

We study how asymmetric information affects the set of rationalizable solutions in a linear setup where the outcome is determined by forecasts about this same outcome. The unique rational expectations equilibrium is also the unique rationalizable solution when the sensitivity of the outcome to...

Existing no trade results are based on the common prior assumption (CPA). This paper identifies a strictly weaker condition than the CPA under which speculative trade is impossible in a rational expectations equilibrium (REE). As our main finding, we demonstrate the impossibility of speculative...

This paper reexamines the explanatory power of Taylor rule fundamentals for real exchange rate determination. We assume the agents know the time-varying parameters in central bank policy rules. The empirical results suggest that a monetary policy rule with regime switching is better able to...

We define continuous-time dynamics for exchange economies with fiat money. Traders have locally rational expectations, face a cash-in-advance constraint, and continuously adjust their short-run dominant strategy in a monetary strategic market game involving a double-auction with limit-price...

After visually inspecting Phillips curves for maturing countries in the Asia Pacific region, this paper rigorously tests various features deduced from the images. More specifically, it asks three questions: Do trade-off Phillips curves characterize maturing nations in the region? Do the curves...

Due to their many applications, large Bayesian games have been a subject of growing interest in game theory and related fields. But to a large extent, models (1) have been restricted to one-shot interaction, (2) are based on an assumption that player types are independent and (3) assume that the...

This paper offers a theory of model reference adaptive beliefs as a selection device in Markov-switching economies under equilibrium indeterminacy. Consistent with the classical rational choice paradigm, our theory requires that endogenous expectations be replaced with a general-measurable...