Stable Noisy K-State Markov Sunspots

University of Oregon, Economics Working Paper No. 242

44 Pages Posted: 30 Mar 2003

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: July 18, 2002

Abstract

We consider a linear stochastic univariate rational expectations model, with a predetermined variable, and consider solutions driven by an extraneous finite state Markov process as well as by the fundamental noise. We obtain conditions for existence of noisy k-state sunspot equilibria (noisy k-SSEs) and, for the case k=2, of noisy k-state dependent sunspot equilibria (noisy k-*SDSs). k-*SDSs are driven by a finite state sunspot but have an infinite range of values even in the nonstochastic model. Stability under econometric learning is analyzed using representations that nest both types of solution. For the case k=2, we find that noisy 2-SSEs and noisy 2-*SDSs are learnable for parameters in proper subsets of the regions of their existence.

Keywords: Indeterminacy, sunspots, stability, learning, expectations

JEL Classification: C62, E32, D84, D83

Suggested Citation

Evans, George W. and McGough, Bruce, Stable Noisy K-State Markov Sunspots (July 18, 2002). University of Oregon, Economics Working Paper No. 242, Available at SSRN: https://ssrn.com/abstract=322340 or http://dx.doi.org/10.2139/ssrn.322340

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)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
40
Abstract Views
771
PlumX Metrics