Escape dynamics in learning models pdf

The previous example illustrated how escape dynamics can generate large fluctuations around a self confirming equilibrium. Can a theory in which a process of learning and maybe forgetting about inflationunemployment dynamics rationalize the inflation outcomes over which the u. Escape dynamics in learning models noah williams department of economics, university of wisconsin madison email. However in stochastic environments, there may be rare but recurrent episodes where beliefs escape from the equilibrium. Impacts of priors on convergence and escapes from nash inflation. Impacts of priors on convergence and escape from nash inflation. Although our results can be used to analyze multiplicities as well, in this paper we focus on models with a unique equilibrium. We characterize these escape dynamics by drawing on the theory of large deviations. This approach is based on applying results of continuous. In the context of a model of monetary policy, this paper analyzes dynamics that govern both convergence and escape under a more general class of priors. In particular, i study a model of a monopolist learning its demand curve, subject to both cost and demand shocks. Escape dynamics in learning models oxford academic journals. Escape dynamics in learning models 3 tic transition rates between equilibria.

This paper illustrates and characterizes how adaptive learning can lead to recurrent large fluctuations. I now show how escape dynamics in learning models can generate time series which differs qualitatively from the sce, with recurrent, regular periods of extended deviations from the sce. Escape dynamics in learning models noahwilliams department of economics, princeton university email. The escape route dynamics cause recurrent outcomes close to the ramsey commitment inflation rate in a model with an adaptive government. I characterize the escape dynamics by drawing on the theory of large. My results build on dupuis and kushner 1989, who develop a theory of large deviations for stochastic approximation models, and characterize escapes via a. We extend a continuoustime approach to the analysis of escape dynamics in economic models with adaptive learning with constant gain.

This article illustrates and characterizes how adaptive learning can lead to recurrent large fluctuations. An agent operating in a selfreferential environment is aware of potential model misspecification, and tries to detect it, in realtime. I characterize the escape dynamics by drawing on the theory of large deviations, developing new results which make this theory directly applicable in a class of learning models. Duopoly competition, escape dynamics and noncooperative. Another ode governs escape dynamics that recurrently propel away from a selfconfirming equilibrium. Escape dynamics in learning models 3 model they retain the same regular character and size.

Citeseerx document details isaac councill, lee giles, pradeep teregowda. Learning models have typically focused on the convergence of beliefs toward an equilibrium. Pdf escape dynamics in learning models researchgate. The likelihood, frequency, and most likely direction of escapes are all characterized by a deterministic control problem. Learning models have typically focused on convergence of beliefs toward an equilibrium. While our methods can be applied to a variety of models, not all of them will have prominent escape dynamics. Pdf escape dynamics in learning models semantic scholar. We characterize these escape dynamics by drawing on the theory of large deviations, developing new results which make this theory directly applicable in a class of linearquadratic learning models. This paper studies adaptive learning with multiple models.