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Learning and Expectations in Macroeconomics

By Seppo Honkapohja

Product Image: Learning and Expectations in Macroeconomics

Learning and Expectations in Macroeconomics

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Description
A crucial challenge for economists is figuring out how people interpret the world and form expectations that will likely influence their economic activity. Inflation, asset prices, exchange rates, investment, and consumption are just some of the economic variables that are largely explained by expectations. Here George Evans and Seppo Honkapohja bring new explanatory power to a variety of expectation formation models by focusing on the learning factor. Whereas the rational expectations paradigm offers the prevailing method to determining expectations, it assumes very theoretical knowledge on the part of economic actors. Evans and Honkapohja contribute to a growing body of research positing that households and firms learn by making forecasts using observed data, updating their forecast rules over time in response to errors. This book is the first systematic development of the new statistical learning approach.
Depending on the particular economic structure, the economy may converge to a standard rational-expectations or a "rational bubble" solution, or exhibit persistent learning dynamics. The learning approach also provides tools to assess the importance of new models with expectational indeterminacy, in which expectations are an independent cause of macroeconomic fluctuations. Moreover, learning dynamics provide a theory for the evolution of expectations and selection between alternative equilibria, with implications for business cycles, asset price volatility, and policy. This book provides an authoritative treatment of this emerging field, developing the analytical techniques in detail and using them to synthesize and extend existing research.
Product details
Edition:
1
Number of Pages:
424
Release Date:
2001-01-08
Publication Date:
2001-01-28
Publisher:
Princeton University Press
Languages:
Original: English
ISBN10:
0691049211
ISBN13:
9780691049212
GPSR Manufacturer Reference:
[email protected]
Weight:
837 g
Height:
161 cm
Width:
240 cm
Thickness:
28 cm
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