Saddlepath Learning

Martin Ellison and Joseph Pearlman

CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: Saddlepath learning occurs when agents know the form but not the coefficients of the sad?dlepath relationship defining rational expectations equilibrium. Under saddlepath learning, we obtain a completely general relationship between determinacy and e-stability, and generalise Min?imum 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 demon?strating 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: 2010-02
New Economics Papers: this item is included in nep-cba and nep-upt
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Citations: View citations in EconPapers (8)

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Journal Article: Saddlepath learning (2011)
Working Paper: Saddlepath Learning (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:san:cdmacp:0710

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