E-stability and stability of adaptive learning in models with private information
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In: Journal of Economic Dynamics and Control, Vol. 33, No. 12, 01.12.2009, p. 2001-2014.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - E-stability and stability of adaptive learning in models with private information
AU - Heinemann, Maik
PY - 2009/12/1
Y1 - 2009/12/1
N2 - The paper demonstrates how the E-stability principle introduced by Evans and Honkapohja [2001. Learning and Expectations in Macroeconomics. Princeton University Press, Princeton, NJ] can be applied to models with heterogeneous and private information in order to assess the stability of rational expectations equilibria under learning. The paper extends already known stability results for the Grossman and Stiglitz [1980. On the impossibility of informationally efficient markets. American Economic Review 70, 393-408] model to a more general case with many differentially informed agents and to the case where information is endogenously acquired by optimizing agents. In both cases it turns out that the rational expectations equilibrium of the model is inherently E-stable and thus locally stable under recursive least squares learning.
AB - The paper demonstrates how the E-stability principle introduced by Evans and Honkapohja [2001. Learning and Expectations in Macroeconomics. Princeton University Press, Princeton, NJ] can be applied to models with heterogeneous and private information in order to assess the stability of rational expectations equilibria under learning. The paper extends already known stability results for the Grossman and Stiglitz [1980. On the impossibility of informationally efficient markets. American Economic Review 70, 393-408] model to a more general case with many differentially informed agents and to the case where information is endogenously acquired by optimizing agents. In both cases it turns out that the rational expectations equilibrium of the model is inherently E-stable and thus locally stable under recursive least squares learning.
KW - Economics
KW - Recursive least squares learning
KW - E-Stability
KW - Rational expectations
KW - Private information
UR - http://www.scopus.com/inward/record.url?scp=70349559120&partnerID=8YFLogxK
UR - https://www.mendeley.com/catalogue/238b9a22-87ce-37a3-ac05-41bd58dd416a/
U2 - 10.1016/j.jedc.2009.07.002
DO - 10.1016/j.jedc.2009.07.002
M3 - Journal articles
VL - 33
SP - 2001
EP - 2014
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
SN - 0165-1889
IS - 12
ER -