Publication Type

Working Paper

Publication Date

1-1996

Abstract

This paper examines the stability of deterministic steady-states with a one dimensional state-variable and a smooth, recursive updating rule. It is shown that the only possibly stable steady states are those associated with random walk beliefs, provided there is motion on a center manifold, which is the case when a key parameter is non-zero; In the extant literature, there is no motion on the center manifold (the parameter is zero), a consequence of the specific assumption that the expected value of the state variable next period determines its current value. The stability properties are seen to be robust with respect to small misspecifications in the agents fixed perception of the steady state.

Keywords

learning, stability, random walk

Discipline

Econometrics

Research Areas

Economic Theory

First Page

1

Last Page

28

Publisher

IVIE discussion paper

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://web2011.ivie.es/downloads/docs/wpasad/wpasad-1996-02.pdf

Included in

Econometrics Commons

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