Economic Theory

, Volume 30, Issue 3, pp 493–513

On learning equilibria

Open Access
Research Article

DOI: 10.1007/s00199-005-0059-1

Cite this article as:
Tuinstra, J. & Wagener, F.O.O. Economic Theory (2007) 30: 493. doi:10.1007/s00199-005-0059-1


Bullard (1994) and Schönhofer (1999) show that endogenous business cycles may emerge in an inflationary overlapping generations model where households predict future inflation rates by running a least squares regression on prices. We show that given the same beliefs but under an alternative, more natural, estimation procedure based upon inflation rates the monetary steady state will be globally stable for a large set of savings functions. We also study an evolutionary competition between the two estimation procedures. Although the dynamics are stabilized for a large set of parameter values, endogenous business cycles may still emerge in this heterogeneous beliefs framework.


Overlapping generations models Learning Endogenous business cycles Heterogeneous beliefs Evolutionary dynamics 

JEL Classification Numbers

D83 D84 D90 E31 E32 
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Copyright information

© Springer-Verlag 2005

Authors and Affiliations

  1. 1.Department of Quantitative Economics and CeNDEF, Faculty of Economics and EconometricsUniversity of AmsterdamAmsterdamThe Netherlands

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