Publication Type
Working Paper
Version
publishedVersion
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
Citation
CHATTERJI, Shurojit.
Temporary equililibrium dynamics with learning: The stability of random walk beliefs. (1996). 1-28.
Available at: https://ink.library.smu.edu.sg/soe_research/2113
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://web2011.ivie.es/downloads/docs/wpasad/wpasad-1996-02.pdf