A Short History in Defence of Adaptive Learning

Stefano Eusepi and Bruce Preston

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper tells the story of adaptive learning. With origins in the rational expectations revolution, models of adaptive learning are as much about moving people’s expectations closer to rational expectations as further away. But relaxing the rational expectations requirement that subjective expectations are model consistent permits addressing a broader class of economic questions as well as resolving certain empirical puzzles. Importantly, models of optimal intertemporal decision making with adaptive learning are supported by a growing body of empirical evidence using surveys of professional, household, firm and policymaker forecasts.

Keywords: adaptive expectations; rational expectations; adaptive learning; inflation expectations (search for similar items in EconPapers)
JEL-codes: D83 D84 E32 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2023-10
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-52

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