Optimal Growth and Uncertainty: Learning

Christos Koulovatianos, Leonard Mirman and Marc Santugini ()
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Marc Santugini: IEA, HEC Montréal, http://www.hec.ca/iea/

No 07-05, Cahiers de recherche from HEC Montréal, Institut d'économie appliquée

Abstract: We introduce learning in a Brock-Mirman environment and study the effect of risk generated by the planner's econometric activity on optimal consumption and investment. Here, learning introduces two sources of risk about future payoffs: structural uncertainty and uncertainty from the anticipation of learning. The latter renders control and learning nonseparable. We present two sets of results in a learning environment. First, conditions under which the introduction of learning increases or decreases optimal consumption are provided. The effect depends on the strengths and directions of the two sources of risk, which may pull in opposite directions. Second, the effects of changes in the mean and riskiness of the distribution of the signal and initial beliefs on optimal consumption are studied.

Keywords: Optimal Growth; Uncertainty; Learning; Dynamic Programming (search for similar items in EconPapers)
JEL-codes: D8 D9 E2 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2007-06, Revised 2008-02
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Optimal growth and uncertainty: Learning (2009)
Working Paper: Optimal Growth and Uncertainty: Learning (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:iea:carech:0705

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