Unemployment and Econometric Learning

Schaefer, D. and C. Singleton. 2018. "Unemployment and econometric learning." Research in Economics, 72(2): 277-296. DOI: 10.1016/j.rie.2017.10.005

38 Pages Posted: 21 Jan 2016 Last revised: 29 May 2019

See all articles by Daniel Schaefer

Daniel Schaefer

University of Edinburgh

Carl Singleton

Department of Economics, University of Reading

Date Written: January 2, 2017

Abstract

We apply well-known results of the econometric learning literature to the Mortensen-Pissarides real business cycle model. Agents can always learn the unique rational expectations equilibrium (REE), for all possible well-defined sets of parameter values, by using the minimum-state-variable solution to the model and decreasing gain learning. From this perspective the assumption of rational expectations in the model could be seen as reasonable. But using a parametrisation with UK data, simulations show that the speed of convergence to the REE is slow. This type of learning dampens the cyclical response of unemployment to small structural shocks.

Keywords: real business cycle, unemployment, adaptive learning, expectational stability

JEL Classification: E24, E32, J64

Suggested Citation

Schaefer, Daniel and Singleton, Carl, Unemployment and Econometric Learning (January 2, 2017). Schaefer, D. and C. Singleton. 2018. "Unemployment and econometric learning." Research in Economics, 72(2): 277-296. DOI: 10.1016/j.rie.2017.10.005. Available at SSRN: https://ssrn.com/abstract=2719470 or http://dx.doi.org/10.2139/ssrn.2719470

Daniel Schaefer

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

Carl Singleton (Contact Author)

Department of Economics, University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
221
PlumX Metrics