SFB 303 Discussion Paper No. B-303
Author: Zenner, M.
Title: Prediction Error Learning and Rational Expectations
in Autoregressive Models with Forecast Feedback
Abstract: The rational expectations hypothesis is supported
if rational expectations are stable with respect to reasonable learning
procedures. We consider the Stochastic Gradient-Algorithm as a boundedly
rational learning procedure in an univariate ARX-Model with forecast
feedback. We prove that whenever there exists a stable rational expectations
equilibrium and the influence of the forecast feedback is limited the
learning agents cannot destabilize the model and learn to form rational
expectations with probability one.
Keywords: Rational expectations, learning, model specification
JEL-Classification-Number: C22, C40, C62, D83
Creation-Date: December 1994
URL:
../1994/b/bonnsfb303.pdf
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