On the fragility of sunspot equilibria under learning and evolutionary dynamics

Michele Berardi

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: In this paper we investigate the possibility of sunspot equilibria to emerge from a process of learning and adaptation on agents' beliefs. To such end, we consider both …finite state Markov sunspots and sunspots in autoregressive form and derive conditions for the existence of an heterogeneous equilibrium where only a fraction of agents condition their forecasts on the sunspot: such conditions impose restrictions across primitive parameters, which are the equivalent, in a heterogeneous setting, of the resonant conditions found in the literature for homogeneous equilibria. We then show that evolutionary dynamics on predictor selection imply that such restrictions need to evolve endogenously with population shares, and argue that such requirement questions the possibility of sunspot equilibria to emerge through a process of evolution and adaptation on agents' beliefs. It follows that, in order for a sunspot equilibrium to obtain, all agents must simultaneously coordinate on using the same sunspot variable at the same time.

Pages: 24 pages
Date: 2013
New Economics Papers: this item is included in nep-evo
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hummedia.manchester.ac.uk/schools/soss/cgbc ... apers/dpcgbcr186.pdf (application/pdf)

Related works:
Journal Article: On the fragility of sunspot equilibria under learning and evolutionary dynamics (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:186

Access Statistics for this paper

More papers in Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Marianne Sensier ().