The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Learning in Macroeconomics

  • George W. Evans
  • Seppo Honkapohja
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2003

Abstract

Expectations play a key role in macroeconomics. The assumption of rational expectations has been recently relaxed by explicit models of forecasting and model updating. Rational expectations can be assessed for stability under various types of learning, with least squares learning playing a prominent role. In addition to assessing the plausibility of an equilibrium, learning also provides a selection criterion when there are multiple equilibria. Monetary policy should be designed to avoid instability under learning and to facilitate coordination on desirable equilibria. Learning can also help to explain macroeconomic fluctuations as arising through either instabilities, stable indeterminacies or persistent learning dynamics.

Keywords

Actual law of motion Adaptive learning Animal spirits Asset pricing Bounded rationality Cagan model Calibration Constant gain learning Eductive learning Expectational stability Expectations Game theory Hyperinflation Imperfect knowledge Increasing social returns Indeterminacy of equilibrium Interest-rate rule Learning in macroeconomics Liquidity trap Monetary policy Multiple equilibria New Keynesian macroeconomics Overlapping contracts model Overlapping generations model Perceived law of motion Phillips curve Rational expectations Rational expectations equilibrium Rational learning Real business cycles Recursive least squares Seigniorage Stationary sunspot equilibria Sunspot equilibrium Taylor rule Uniqueness of equilibrium Vector autoregression 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • George W. Evans
    • 1
  • Seppo Honkapohja
    • 1
  1. 1.