Published and unpublished papers by Wei Xiao

Instability of Sunspot Equilibria in Real Business Cycle Models under Infinite Horizon Learning

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This paper examines stability of sunspot equilibria in one-sector RBC models under infinite horizon learning. We present general conditions under which the reduced-form model can possess E-stable sunspot equilibria, and apply these conditions to three prominent one-sector RBC models. We find that the rational expectations sunspot equilibria are generally unstable under learning.

Download working paper version here.


Written by wxiao

March 12, 2017 at 6:54 pm

Posted in Published

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