Economic Dynamics with Learning: New Stability Results

Seppo Honkapohja and George Evans

No 110, CESifo Working Paper Series from CESifo

Abstract: Drawing upon recent contributions in the statistical literature, we present a new result on the convergence of recursive, stochastic algorithms which can be applied to eonomic models with learning. The formal result provides probability bounds for convergence which can be used to describe the local stability under learning of rational expectations equilibria. Our treatment also generalizes previous results by permitting the state variable to follow a nonlinear Markov process. Two economic applications are discussed.

Date: 1996
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Related works:
Journal Article: Economic Dynamics with Learning: New Stability Results (1998)
Working Paper: Economic Dynamics with Learning: New Stability Results
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