Stable Sunspot Equilibria in Models with Predetermined Variables

University of Oregon, Economics Working Paper No. 239

43 Pages Posted: 1 Aug 2002

See all articles by George W. Evans

George W. Evans

University of Oregon - Department of Economics; University of St. Andrews - School of Economics and Finance

Bruce McGough

Oregon State University - Department of Economics

Date Written: April 17, 2002

Abstract

We consider a linear stochastic univariate rational expectations model, with a predetermined variable, and provide alternative representations of SSEs (stationary sunspot equilibria). For a strict subset of the parameter space there exist SSEs that are locally stable under least squares learning provided agents use a common factor representation for their estimated law of motion. These results indicate that for some parameter regions SSEs are more likely to arise under private agent learning than previously recognized.

Keywords: Endogenous fluctuations, learning, expectational stability, sunspot equilibria

JEL Classification: E31, E32, C62, D83, D84,

Suggested Citation

Evans, George W. and McGough, Bruce, Stable Sunspot Equilibria in Models with Predetermined Variables (April 17, 2002). University of Oregon, Economics Working Paper No. 239, Available at SSRN: https://ssrn.com/abstract=315566 or http://dx.doi.org/10.2139/ssrn.315566

George W. Evans (Contact Author)

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
541-346-4662 (Phone)
541-346-1243 (Fax)

University of St. Andrews - School of Economics and Finance ( email )

The Scores, Castlecliff
St. Andrews, Fife KY16 8RD
United Kingdom
44-1334-462435 (Phone)

HOME PAGE: http://www.st-andrews.ac.uk/economics/staff/pages.g.evans.shtml

Bruce McGough

Oregon State University - Department of Economics ( email )

303 Ballard Extension Hall
Corvallis, OR 97331
United States
541-737-2321 (Phone)
541-737-5917 (Fax)

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