Slow Learning

Lawrence Christiano, Martin Eichenbaum and Benjamin K. Johannsen

No 32358, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides an analytic characterization of the speed of convergence under learning to a rational expectations equilibrium (REE) for a large class of multivariate models. We show that learning is slower when people’s beliefs about model outcomes are more self-fulfilling. The paper also investigates which features of a model economy make beliefs more self-fulfilling, using variants of the simple new-Keynesian model and a medium-scale DSGE model. For empirically plausible specifications of these models, convergence of a learning equilibrium to the REE is so slow that analysis based on rational expectations can be misleading.

JEL-codes: E12 E39 E70 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Note: EFG IFM
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Working Paper: Slow Learning (2026)
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