Eductive stability in real business cycle models

George Evans, Roger Guesnerie () and Bruce McGough ()

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Abstract: We re-examine issues of coordination in the standard RBC model. Can the unique rational expectations equilibrium be "educed" by rational agents who contemplate the possibility of small deviations from equilibrium? Surprisingly, we find that coordination along this line cannot be expected. Rational agents anticipating small but possibly persistent deviations have to face the existence of retroactions that necessarily invalidate any initial tentative "common knowledge" of the future. This "impossibility" theorem for eductive learning is not fully overcome when adaptive learning is incorporated into the framework.

Keywords: standard RBC model; coordination (search for similar items in EconPapers)
Date: 2010-12
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00565011v1
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Related works:
Journal Article: Eductive Stability in Real Business Cycle Models (2019)
Working Paper: Eductive Stability in Real Business Cycle Models (2019)
Working Paper: Eductive Stability in Real Business Cycle Models (2019)
Working Paper: Eductive stability in real business cycle models (2010)
Working Paper: Eductive Stability in Real Business Cycle Models (2010)
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