Eductive Stability in Real Business Cycle Models

George Evans, Roger Guesnerie () and Bruce McGough ()

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: We reexamine issues of coordination in the standard RBC model. Is the unique rational expectations equilibrium attainable by rational agents who contemplate the possibility of small deviations from equilibrium? Surprisingly, we find that coordination cannot be expected. Even with strong common knowledge assumptions, rational agents anticipating small but persistent deviations are led to take actions that eventually contradict the common knowledge assumption. This “impossibility†theorem for eductive learning is not fully overcome when adaptive learning is incorporated into the framework.

Keywords: Eductive Learning; Instability; Fluctuations (search for similar items in EconPapers)
JEL-codes: C62 D84 E32 (search for similar items in EconPapers)
Pages: 33
Date: 2010-11-13
New Economics Papers: this item is included in nep-dge
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Related works:
Journal Article: Eductive Stability in Real Business Cycle Models (2019)
Working Paper: Eductive Stability in Real Business Cycle Models (2019)
Working Paper: Eductive Stability in Real Business Cycle Models (2019)
Working Paper: Eductive stability in real business cycle models (2010)
Working Paper: Eductive stability in real business cycle models (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ore:uoecwp:2010-16

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