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Stationarity of econometric learning with bounded memory and a predicted state variable

Tatiana Damjanovic (), Šarūnas Girdėnas () and Keqing Liu ()

Economics Letters, 2015, vol. 130, issue C, 93-96

Abstract: In this paper, we consider a model where producers set their prices based on their prediction of the aggregated price level and an exogenous variable, which can be a demand or a cost-push shock. To form their expectations, they use OLS-type econometric learning with bounded memory. We show that the aggregated price follows the random coefficient autoregressive process and we prove that this process is covariance stationary.

Keywords: Econometric learning; Bounded memory; Random coefficient autoregressive process; Stationarity (search for similar items in EconPapers)
JEL-codes: C22 C53 C62 D83 E31 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Stationarity of Econometric Learning with Bounded Memory and a Predicted State Variable (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:130:y:2015:i:c:p:93-96

DOI: 10.1016/j.econlet.2015.03.011

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