Stationarity of Econometric Learning with Bounded Memory and a Predicted State Variable

Tatiana Damjanovic (), Šarūnas Girdėnas () and Keqing Liu

No 1502, Discussion Papers from University of Exeter, Department of Economics

Abstract: In this paper, we consider a model where producers set their prices based on their prediction of the aggregated price level and an exogenous variable, which can be a demand or a cost-push shock. To form their expectations, they use OLS-type econometric learning with bounded memory. We show that the aggregated price follows the random coefficient autoregressive process and we prove that this process is covariance stationary.

Keywords: econometric learning; bounded memory; random coefficient autoregressive process; stationarity. (search for similar items in EconPapers)
JEL-codes: C22 C53 C62 D83 E31 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mac
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https://exetereconomics.github.io/RePEc/dpapers/DP1502.pdf (application/pdf)

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Journal Article: Stationarity of econometric learning with bounded memory and a predicted state variable (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:1502

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