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LEARNING AND THE STABILITY OF CYCLES

Published online by Cambridge University Press:  01 March 1998

James Bullard
Affiliation:
Federal Reserve Bank of St. Louis
John Duffy
Affiliation:
University of Pittsburgh
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Abstract

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We investigate the extent to which agents can learn to coordinate onstationary perfect-foresight cycles in a general-equilibrium environment.Depending on the value of a preference parameter, the limiting backward(direction of time reversed) perfect-foresight dynamics are characterized bysteady-state, periodic, or chaotic trajectories for real money balances. We relax the perfect-foresight assumption and examine how a population ofartificial, heterogeneous adaptive agents might learn in such anenvironment. These artificial agents optimize given their forecasts offuture prices, and they use forecast rules that are consistent with steady-state or periodic trajectories for prices. The agents' forecast rules areupdated by a genetic algorithm. We find that the population of artificialadaptive agents is able eventually to coordinate on steady state and low-order cycles, but not on the higher-order periodic equilibria that existunder the perfect-foresight assumption.

Information

Type
Research Article
Copyright
© 1998 Cambridge University Press