Saddlepath Learning

Martin Ellison and Joseph Pearlman

No 505, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Saddlepath learning occurs when agents learn adaptively using a perceived law of motion that has the same form as the saddlepath relationship in rational expectations equilibrium. Under saddlepath learning, we obtain a completely general relationship between determinacy and e-stability, and generalise Minimum State Variable results previously derived only under full information. When the system is determinate, we show that a learning process based on the saddlepath is always e-stable. When the system is indeterminate, we find there is a unique MSV solution that is iteratively e-stable. However, in this case there is a sunspot solution that is learnable as well. We conclude by demonstrating that our results hold for any information set.

Keywords: E-stability; Determinacy; Learning; Saddlepath stability (search for similar items in EconPapers)
JEL-codes: C60 E00 (search for similar items in EconPapers)
Date: 2010-09-01
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Saddlepath learning (2011)
Working Paper: Saddlepath Learning (2010)
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