Learning, Adaptive Expectations, and Technology Shocks

Kevin Huang, Zheng Liu and Tao Zha

No 2008-18, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: This study explores the macroeconomic implications of adaptive expectations in a standard growth model. We show that the self-confirming equilibrium under adaptive expectations is the same as the steady state rational expectations equilibrium for all admissible parameter values, but that dynamics around the steady state are substantially different between the two equilibria. The differences are driven mainly by the dampened wealth effect and the strengthened intertemporal substitution effect, not by escapes emphasized by Williams (2003). Consequently, adaptive expectations can be an important source of frictions that amplify and propagate technology shocks and seem promising for generating plausible labor market dynamics.

Keywords: Macroeconomics (search for similar items in EconPapers)
JEL-codes: C62 E32 (search for similar items in EconPapers)
Pages: 37
Date: 2008-09-01
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
Note: PDF date: September 7, 2008.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.frbsf.org/wp-content/uploads/wp08-18bk.pdf PDF - view (application/pdf)
https://www.frbsf.org/research-and-insights/public ... d-technology-shocks/ FRBSF - view (text/html)
https://fraser.stlouisfed.org/title/working-papers ... nology-shocks-639282 FRASER - view (text/html)

Related works:
Journal Article: Learning, Adaptive Expectations and Technology Shocks (2009)
Journal Article: Learning, Adaptive Expectations and Technology Shocks (2009)
Working Paper: Learning, adaptive expectations, and technology shocks (2008)
Working Paper: Learning, Adaptive Expectations, and Technology Shocks (2008)
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:fip:fedfwp:2008-18

Ordering information: This working paper can be ordered from

DOI: 10.24148/wp2008-18

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().