In‐Koo Cho and Kenneth Kasa
- Published in print:
- 2013
- Published Online:
- May 2013
- ISBN:
- 9780199666126
- eISBN:
- 9780191749278
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199666126.003.0006
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter studies adaptive learning with multiple models. An agent is aware of potential model misspecification, and tries to detect it, in realtime, using an econometric specification test. If ...
More
This chapter studies adaptive learning with multiple models. An agent is aware of potential model misspecification, and tries to detect it, in realtime, using an econometric specification test. If the current model passes the test, it is used to construct an optimal policy. If it fails the test, a new model is randomly selected from a fixed set of models. As the rate of coefficient updating decreases, one model becomes dominant, and is used ‘almost always’. Dominant models can be characterized using the tools of large deviations theory. The analysis is applied to a standard cobweb model.Less
This chapter studies adaptive learning with multiple models. An agent is aware of potential model misspecification, and tries to detect it, in realtime, using an econometric specification test. If the current model passes the test, it is used to construct an optimal policy. If it fails the test, a new model is randomly selected from a fixed set of models. As the rate of coefficient updating decreases, one model becomes dominant, and is used ‘almost always’. Dominant models can be characterized using the tools of large deviations theory. The analysis is applied to a standard cobweb model.
Thomas J. Sargent and Jouko Vilmunen
- Published in print:
- 2013
- Published Online:
- May 2013
- ISBN:
- 9780199666126
- eISBN:
- 9780191749278
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199666126.003.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
The logical structures that emerge from striving to put economic theory at the service of public policy are intrinsically beautiful in their internal structures and also useful in their applications. ...
More
The logical structures that emerge from striving to put economic theory at the service of public policy are intrinsically beautiful in their internal structures and also useful in their applications. The contributors to this volume are leaders in patiently creating models and pushing forward technical frontiers. Revealed preferences show that they love equilibrium stochastic processes that are determined by Euler equations for modelling people's decisions about working, saving, investing, and learning, set within contexts designed to enlighten monetary and fiscal policy‐makers. Their papers focus on forces that can help understand macroeconomic outcomes, including learning, multiple equilibria, moral hazard, asymmetric information, heterogeneity, and constraints on commitment technologies. The contributions follow modern macroeconomics in using mathematics and statistics to understand behaviour in situations where there is uncertainty about how the future unfolds from the past. The contributions to this volume cover a wide range of issues in macroeconomics and macroeconomic policy. They thus seek to give a broader and more balanced view of the scope of modern macroeconomics.Less
The logical structures that emerge from striving to put economic theory at the service of public policy are intrinsically beautiful in their internal structures and also useful in their applications. The contributors to this volume are leaders in patiently creating models and pushing forward technical frontiers. Revealed preferences show that they love equilibrium stochastic processes that are determined by Euler equations for modelling people's decisions about working, saving, investing, and learning, set within contexts designed to enlighten monetary and fiscal policy‐makers. Their papers focus on forces that can help understand macroeconomic outcomes, including learning, multiple equilibria, moral hazard, asymmetric information, heterogeneity, and constraints on commitment technologies. The contributions follow modern macroeconomics in using mathematics and statistics to understand behaviour in situations where there is uncertainty about how the future unfolds from the past. The contributions to this volume cover a wide range of issues in macroeconomics and macroeconomic policy. They thus seek to give a broader and more balanced view of the scope of modern macroeconomics.
