Existence of adaptively stable sunspot equilibria near an indeterminate steady state |
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Authors: | George W Evans Seppo Honkapohja |
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Institution: | a Department of Economics, 1285 University of Oregon, Eugene, OR 97403-1285, USA b Department of Economics, University of Helsinki, Helsinki, Finland |
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Abstract: | We examine the nonlinear model xt=EtF(xt+1). Markov stationary sunspot equilibria (SSEs) exist near an indeterminate steady state, , provided . Despite the importance of indeterminacy in macroeconomics, earlier results have not provided conditions for the existence of adaptively stable SSEs near an indeterminate steady state. We show that there exist Markov SSEs near x? that are E-stable, and therefore locally stable under adaptive learning, if . |
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Keywords: | C62 D83 D84 E31 E32 |
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