Are Policy Variables Exogenous?: The Econometric Implications of Learning While Maximizing

Front Cover
Springer Science & Business Media, Aug 28, 1991 - Business & Economics - 162 pages
0 Reviews
1. 1 Motivation and Definition of Topic To provide motivation and to help define the topic of this study, important links between specific areas of economic theory are first highlighted. (i) Learning and Rational Expectations Theory In a standard rational expectations setting, agents in equilibrium have all the information about the model that enables them to correctly forecast future payoff-relevant variables. What rational expectations theory in its standard form does not tell us is what happens outside a rational expectations equilibrium. Less than complete knowledge of the model is a possible way to represent a situation outside the rational expectations equilibrium. It is natural to assume that agents recognize error and optimally utilize all available external information to improve on their information level, i. e. learn. Based on the information acquired by learning they modify their behavior. Under certain conditions learning steers the economy to the rational expectations equilibrium (Spear (1989), Blume, Bray and Easley (1982), Townsend (1983. This literature shows that learning is a possible mechanism to acquire the necessary level of information that agents are assumed to possess in a rational expectations equilibrium and hence there is a clear link between rational expectations theory and the 2 theory of learning. This fact is also emphasized among others by Friedman (1975), Pesaran (1987) and DeCanio (1979). (ii) Rational Expectations and Econometrics The equilibrium consequences of the rational expectations hypothesis are discussed in a considerable body of literature - cf.
 

What people are saying - Write a review

We haven't found any reviews in the usual places.

Selected pages

Contents

I1 Motivation and Definition of Topic
1
12 Overview and Literature Survey
5
II1 The Model Tax Rate Determination under Simultaneous Optimization and Learning
16
II2 Optimality of Active Learning in General
27
II3 Optimality of Active Learning in the Model
30
II4 An Alternative Specification
34
II5 Summary
39
III Econometric Implications
43
IV21 Results Passive Learning
75
IV3 Active Learning
88
IV31 Results Active Learning
99
V Tests for Exogeneity VI Overview
111
V2 Formulation of the Exogeneity Tests
115
V3 Results of the Exogeneity Tests
122
Summary Directions for Future Research VI1 Summary
127
VI21 Time Deformation and Learning
128

III2 Implications
48
III21 The Impact of Learning on Weak Exogeneity
49
III22 The Impact of Learning on Strong Exogeneity
53
III23 The Impact of Learning on Super Exogeneity
55
III24 Learning Induces Nonstationarity
69
III3 Summary
70
IV Simulation
72
IV2 Passive Learning
74
VI22 Incomplete Learning on the Long Run
131
VI23 On Intertemporal Transfer of Resources
132
APPENDIX A
133
APPENDIX B
139
APPENDIX C
142
APPENDIX D
147
Bibliography
154
Copyright

Other editions - View all

Common terms and phrases

Bibliographic information