Transformations of the State Variable and Learning Dynamics

• Main Authors: CHATTERJI, Shurojit, Lobato, Ignacio N.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Ordinary least squares learning; Stable formulations; Temporary equilibrium; Economic Theory
• Online Access: https://ink.library.smu.edu.sg/soe_research/1791
• Institution: Singapore Management University

This article examines dynamics in a model where agents forecast a one dimensional state variable through ordinary least squares regressions on the lagged values of the state variable. We study the stability properties of alternative transformations of the state variable, such as taking logarithms, w...