EconPapers    
Economics at your fingertips  
 

Unemployment and econometric learning

Daniel Schaefer () and Carl Singleton ()
Additional contact information
Daniel Schaefer: https://sites.google.com/site/danielschaefereconomics/

Authors registered in the RePEc Author Service: Daniel Schäfer

ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh

Abstract: We apply well-known results of the econometric learning literature to the Mortensen-Pissarides real business cycle model. The unique rational expectations equilibrium (REE) is always expectationally stable with decreasing gain learning, and this result is robust to over-parametrisation of the econometric model relative to the minimum state variable form used by agents. And so, from this perspective, the assumption of rational expectations in the model is not unreasonable. However, using a parametrisation with UK data, simulations suggest that the implied rate of convergence to the REE with least squares learning is slow. The cyclical response of unemployment to structural shocks is muted under learning, and a parametrisation which guarantees root-t convergence is generally not consistent with attempts to match the observed volatility of labour market data using the standard model.

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)
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
Date: 2016-01
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.econ.ed.ac.uk/papers/id267_esedps.pdf

Related works:
Journal Article: Unemployment and econometric learning (2018) Downloads
Working Paper: Unemployment and econometric learning (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:267

Access Statistics for this paper

More papers in ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh 31 Buccleuch Place, EH8 9JT, Edinburgh. Contact information at EDIRC.
Bibliographic data for series maintained by Research Office ().

 
Page updated 2019-11-10
Handle: RePEc:edn:esedps:267