Unemployment and econometric learning
Daniel Schaefer and
Carl Singleton ()
Authors registered in the RePEc Author Service: Daniel Schäfer
Research in Economics, 2018, vol. 72, issue 2, 277-296
We apply well-known results of the econometric learning literature to the Mortensen and Pissarides real business cycle model. Agents can always learn the unique rational expectations equilibrium (REE), for all possible well-defined sets of parameter values, by using the minimum-state-variable solution to the model and decreasing gain learning. From this perspective the assumption of rational expectations in the model could be seen as reasonable. But using a parametrisation with UK data, simulations show that the speed of convergence to the REE is slow. This type of learning dampens the cyclical response of unemployment to small structural shocks.
Keywords: Real business cycle; Unemployment; Adaptive learning; Expectational stability (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
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Working Paper: Unemployment and econometric learning (2016)
Working Paper: Unemployment and econometric learning (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:72:y:2018:i:2:p:277-296
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