TEMPORARY EQ'UILIBRIUM DYNAMICS WITH BAYESIAN LEARNING

Shurojit Chatterji

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper examines the stability of deterministic steady-states in a class of economies where the state -variable is one dimensional and where agents use Bayesian techniques to form expectations. Thr dynamics with learning are locally convergent if the prior mean is close to a stable perfect foresight root having modulus less than 1 and if the prior beliefs are held with enough confidence. Thr dynamics are however divergent if the prior mean or the variance of the prior distribution is sufficiently large.

Keywords: Stability; Bayesian learning. (search for similar items in EconPapers)
Pages: 20 pages
Date: 1995-03
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Citations: View citations in EconPapers (7)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-1995-09.pdf Fisrt version / Primera version, 1995 (application/pdf)

Related works:
Journal Article: Temporary Equilibrium Dynamics with Bayesian Learning (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:1995-09

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