Learning in a Misspecified Multivariate Self-Referential Linear Stochastic Model

This paper introduces a general method to study stability (under learning) of equilibria resulting from agents with misspecified perceptions of the law of motion of the economy. This is done by transforming the actual and perceived laws of motion into the form of seemingly unrelated regressions and then linearly projecting the actual law of motion into the same class as the perceived law of motion. I study the New Keynesian IS-LM model with inertia under all possible classes of restricted perceptions. It turns out that the results found in Bullard and Mitra (2002, 2003) are robust under misspecified expectationsAdaptive Learning, Expectational Stability, Monetary Policy Rules, Restricted Perceptions Equilibria, Seemingly Unrelated Regression

Expectational business cycles

I introduce Expectational Business Cycles where aggregate activity fluctuates due to learning, heterogeneous updating rules and random changes in the social norm predictor. Agents use one of two updating rules to learn the equilibrium values while heterogeneity is dictated via an evolutionary process. Uncertainty of a new equilibrium, due to a shock to the structure of the economy, results in a sudden decrease in output. As agents learn the equilibrium, output slowly increases to its equilibrium value. These business cycles arrive faster, are longer and more severe as agents possess less rationality.adaptive learning; aggregate fluctuations; heterogeneous expectations; multiple equilibria; rational expectations

A comparative study on accounting heredity: the case of ex soviet countries versus other eastern european countries

This paper aims at investigating the existence of accounting heredity in some of Eastern European countries. Accounting heredity assumes that at the time the economic paradigm changes, a new accounting system emerges, enclosing both genes from the existing accounting system, as well as genes from a new accounting system used as an inspiration. Data was gathered by sending questionnaires to academics in the respective countries. Studied countries fell into two categories: Ex Soviet countries (Republic of Moldova & Ukrane), and other Est European countries (Romania, Republic of Macedonia and the Czech Republic). It analyses the survival of communist accounting practices in the post-1990 accounting systems and identifies other eternal influences that shaped these accounting systems.Accounting Heredity, Accounting Change, Accounting Genes, Eastern European Countries, Accounting History

Liquidity Traps, Learning and Stagnation

We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead to deflationary spirals with falling prices and falling output. To avoid this outcome we recommend augmenting normal policies with aggressive monetary and fiscal policy that guarantee a lower bound on inflation. In contrast, policies geared toward ensuring an output lower bound are insufficient for avoiding deflationary spirals

Learning in a Misspecified Multivariate Self-referential Linear Stochastic Model

This paper introduces a general method to study stability (under learning) of equilibria resulting from agents with misspecified perceptions of the law of motion of the economy. This is done by transforming the actual and perceived laws of motion into the form of seemingly unrelated regressions and then linearly projecting the actual law of motion into the same class as the perceived law of motion. I study the New Keynesian IS-LM model with inertia under all possible classes of restricted perceptions. It turns out that the results found in Bullard and Mitra (2002, 2003) are robust under misspeci.ed expectations

Learning with Heterogeneous Expectations in an Evolutionary World

This paper studies a game theoretic model where agents choose between two updating rules to predict a future endogenous variable. Agents rationally choose between these predictors based on relative performance. Conditions for evolutionary stability and stability under learning are found for the Nash solutions and corresponding parameter equilibria. Stability conditions are contingent upon parameter values and the initial distribution of heterogeneity. However, when the cost of using the more advanced updating rule is sufficiently large, all agents will asymptotically use the more parsimonious, or Minimum State Variable (MSV), updating rule