Stable Sunspot Solutions in Models with Predetermined Variables
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Date
2002-04-17
Authors
Evans, George W., 1949-
McGough, Bruce
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon, Dept. of Economics
Abstract
We consider a linear stochastic univariate rational expectations model, with a predetermined variable, and provide alternative representations of SSEs (stationary sunspot equilibria). For a strict subset of the parameter space there exist SSEs that are locally stable under least squares learning provided agents use a common factor representation for their estimated law of motion. These results indicate that for some parameter regions SSEs are more likely to arise under private agent learning than previously recognized.
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Keywords
Economics, Sunspots