Mei Zhu - Academia.edu (original) (raw)
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Papers by Mei Zhu
Journal of Economic Theory, 2014
We propose behavioral learning equilibria as a plausible explanation of coordination of individua... more We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and in equilibrium correctly forecast the unconditional sample mean and first-order sample autocorrelation. In the long run, agents thus learn the best univariate linear forecasting rule, without fully recognizing the structure of the economy. The simplicity of our behavioral learning equilibria makes coordination of individual expectations on such an aggregate outcome more likely. In a first application, an asset pricing model with AR(1) dividends, a unique stochastic consistent expectations equilibrium (SCEE) exists characterized by high persistence and excess volatility, and it is globally stable under learning. In a second application, the New Keynesian Phillips curve, multiple equilibria co-exist and learning exhibits path dependence and inflation may switch between low and high persistence regimes.
We propose a simple misspecification equilibrium concept and a behavioral learning process explai... more We propose a simple misspecification equilibrium concept and a behavioral learning process explaining excess volatility in stock prices and high persistence in inflation.
Journal of Economic Theory, 2014
We propose behavioral learning equilibria as a plausible explanation of coordination of individua... more We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and in equilibrium correctly forecast the unconditional sample mean and first-order sample autocorrelation. In the long run, agents thus learn the best univariate linear forecasting rule, without fully recognizing the structure of the economy. The simplicity of our behavioral learning equilibria makes coordination of individual expectations on such an aggregate outcome more likely. In a first application, an asset pricing model with AR(1) dividends, a unique stochastic consistent expectations equilibrium (SCEE) exists characterized by high persistence and excess volatility, and it is globally stable under learning. In a second application, the New Keynesian Phillips curve, multiple equilibria co-exist and learning exhibits path dependence and inflation may switch between low and high persistence regimes.
We propose a simple misspecification equilibrium concept and a behavioral learning process explai... more We propose a simple misspecification equilibrium concept and a behavioral learning process explaining excess volatility in stock prices and high persistence in inflation.