The Department of Economics Macroeconomics Seminar Series presents

Eductive Stability in Real Business Cycle Models
with Bruce McGough,  Oregon State University

Monday, June 6, 2011
1:00-2:30 p.m.
Social Science Plaza B, Room 3266 (Econ Library)

In his talk, McGough will reexamine issues of coordination in the standard RBC model. Is the unique rational expectations equilibrium attainable by rational agents who contemplate the possibility of small deviations from equilibrium? Surprisingly, he finds that coordination cannot be expected. Even with strong common knowledge assumptions, rational agents anticipating small but persistent deviations are led to take actions that eventually contradict the common knowledge assumption. This “impossibility” theorem for eductive learning is not fully overcome when adaptive learning is incorporated into the framework.

For further information, please contact Gloria Simpson, simpsong@uci.edu.
 

 

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