Exponentially fading memory learning in forward-looking economic models.

DOI10.1016/S0165-1889(99)00035-4MaRDI QIDQ1978601zbMATH OpenFDO

Authors Emilio Barucci

Publication date 4 June 2000

Published in Journal of Economic Dynamics and Control (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/S0165-1889(99)00035-4

Mathematics Subject Classification ID

Mathematical economics (91B99)

Review text

In this paper we analyze forward-looking economic models under bounded rationality. We consider a learning mechanism characterized by exponentially fading memory with a learning step not vanishing in the limit. The dynamics of the model under bounded rationality can be parametrized with respect to the memory of the learning mechanism. We show that memory plays a stabilizing role in a local sense: it induces local convergence towards a stationary rational expectations equilibrium and in some cases it does not allow for nonperfect foresight attractors obtained through local bifurcations. We discuss this learning mechanism in pure exchange overlapping generations models. We also analyze models with predetermined state variables, in this setting the effect of memory on the learning dynamics is controversial.

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Cites work

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Cited in

(8)

• Learning can generate long memory
• Mann iteration with power means
• Fundamentalists, chartists and asset pricing anomalies
• Stationarity of econometric learning with bounded memory and a predicted state variable
• Path dependence in models with fading memory or adaptive learning
• Ways of learning in a simple economic setting: A comparison
• Error learning behaviour and stability revisited
• Properties of equilibrium asset prices under alternative learning schemes

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