Existence of Adaptively Stable Sunspot Equilibria near an Indeterminate Steady State

George William Evans () and Seppo Mikko Sakari Honkapohja ()

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: We examine the nonlinear model x_t = E_t F(x_(t+1)). Markov SSEs exist near an indeterminate steady state, hat(x)=F(hat(x)), provided |F'(hat(x)| > 1. Despite the importance of indeterminancy in macroeconomics, earlier results have not provided conditions for the existance of adaptively stable SSEs near an indeterminate steady state. We show that there exists Markov SSEs near hat(x) that are E-stable, and therefore locally stable under adaptive learning, if F'(hat(x)) < -1.

Keywords: Indeterminacy; learnability; expectational stability; endogenous fluctuations (search for similar items in EconPapers)
JEL-codes: C62 D83 D84 E31 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2002-04-06
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Related works:
Working Paper: Existence of Adaptively Stable Sunspot Equilibria Near an Indeterminate Steady State (2001)
Journal Article: Existence of adaptively stable sunspot equilibria near an indeterminate steady state (2003)
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