Arbeitspapier
Learning and Equilibrium Selection in a Monetary Overlapping Generations Model with Sticky Prices
We study adaptive learning in a monetary overlapping generations model with sticky prices and monopolistic competition for the case where learning agents observe current endogenous variables. Observability of current variables is essential for informational consistency of the learning setup with the model set up but generates multiple temporary equilibria when prices are flexible and prevents a straightforward construction of the learning dynamics. Sticky prices overcome this problem by avoiding simultaneity between prices and price expectations. Adaptive learning then robustly selects the determinate (monetary) steady state independent from the degree of imperfect competition. The indeterminate (non-monetary) steady state and non-stationary equilibria are never stable. Stability in a deterministic version of the model may differ because perfect foresight equilibria can be the limit of restricted perceptions equilibria of the stochastic economy with vanishing noise and thereby inherit different stability properties. This discontinuity at the zero variance of shocks suggests to analyze learning in stochastic models.
- Sprache
-
Englisch
- Erschienen in
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Series: CFS Working Paper ; No. 2003/03
- Klassifikation
-
Wirtschaft
Price Level; Inflation; Deflation
Expectations; Speculations
Existence and Stability Conditions of Equilibrium
- Thema
-
adaptive learning
sticky prices
temporary equilibrium
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Adam, Klaus
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, Center for Financial Studies (CFS)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2003
- Handle
- URN
-
urn:nbn:de:hebis:30-10094
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Adam, Klaus
- Goethe University Frankfurt, Center for Financial Studies (CFS)
Entstanden
- 2003
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