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Near-rational expectations in animal spirits models of aggregate fluctuations [An article from: Economic Modelling]
Book Details
Author(s)M. Weder, CEPR
PublisherElsevier
ISBN / ASINB000RR0E5M
ISBN-13978B000RR0E57
AvailabilityAvailable for download now
Sales Rank99,999,999
MarketplaceUnited States 🇺🇸
Description
This digital document is a journal article from Economic Modelling, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
Description:
A growing number of studies has raised concerns about the empirical and theoretical content of rational expectations. This paper evaluates the role of near-rationality in dynamic general equilibrium with indeterminacy. We show that sunspot equilibria are quite robust to perturbations of the forecasting mechanism: the particular form of near-rationality considered exerts little effects on the region of indeterminacy. This upshot casts doubt upon the standpoint that bounded rationality effectively reduces the likelihood of sunspot equilibria. The prime impact of bounded behavior appears to be on volatility and persistence.
Description:
A growing number of studies has raised concerns about the empirical and theoretical content of rational expectations. This paper evaluates the role of near-rationality in dynamic general equilibrium with indeterminacy. We show that sunspot equilibria are quite robust to perturbations of the forecasting mechanism: the particular form of near-rationality considered exerts little effects on the region of indeterminacy. This upshot casts doubt upon the standpoint that bounded rationality effectively reduces the likelihood of sunspot equilibria. The prime impact of bounded behavior appears to be on volatility and persistence.
