A note on learning chaotic sunspot equilibrium

Aloisio Araujo and Wilfredo Maldonado

No 423, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: In this paper we prove convergence to chaotic sunspot equilibrium through two learning rules used in the bounded rationality literature. The rst one shows the convergence of the actual dynamics generated by simple adaptive learning rules to a probability distribution that is close to the stationary measure of the sunspot equilibrium; since this stationary measure is absolutely continuous it results in a robust convergence to the stochastic equilibrium. The second one is based on the E-stability criterion for testing stability of rational expectations equilibrium, we show that the conditional probability distribution de ned by the sunspot equilibrium is expectational stable under a reasonable updating rule of this parameter. We also report some numerical simulations of the processes proposed.

Date: 2001-05-01
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