Convergence in Monetary Inflation Models with Heterogeneous Learning Rules

George Evans, Seppo Honkapohja and Ramon Marimon

No 1310, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Inflation and financing of public expenditure by are analysed in an OLG model where the deficit is constrained to be less than a given fraction of intergenerational savings. Even if there may be multiplicity of steady-state equilibria, we show that, with such a constraint, the dynamics with adaptive learning are globally convergent to a set of equilibria satisfying a local stability condition. We allow for heterogeneity of agents' learning rules and look at the role of some basic behavioural assumptions, such as a certain degree of random e-precautionary savings and inertia on agents' updating of beliefs. We also provide experimental evidence on the effect of public expenditure constraints on the stability of equilibria.

Keywords: Experimental Evidence; Fiscal Rules; Hyperinflation (search for similar items in EconPapers)
JEL-codes: E42 E62 (search for similar items in EconPapers)
Date: 1996-01
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Citations: View citations in EconPapers (23)

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Related works:
Journal Article: CONVERGENCE IN MONETARY INFLATION MODELS WITH HETEROGENEOUS LEARNING RULES (2001)
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