Time-varying parameters and nonconvergence to rational expectations under least squares learning

1992 ◽  
Vol 40 (2) ◽  
pp. 159-166 ◽  
Author(s):  
James Bullard
2003 ◽  
Vol 7 (1) ◽  
pp. 119-139 ◽  
Author(s):  
Bruce McGough

In their landmark paper, Bray and Savin note that the constant-parameters model used by their agents to form expectations is misspecified and that, using standard econometric techniques, agents may be able to determine the time-varying nature of the model's parameters. Here, we consider the same type of model as employed by Bray and Savin except that our agents form expectations using a perceived model with parameters that vary with time. We assume agents use the Kalman filter to form estimates of these time-varying parameters. We find that, under certain restrictions on the structure of the stochastic process and on the value of the stability parameter, the model will converge to its rational expectations equilibrium. Further, the restrictions on the stability parameter required for convergence are identical to those found by Bray and Savin.


Author(s):  
Viktors Ajevskis

AbstractThis study proposes an approach based on a perturbation technique to construct global solutions to dynamic stochastic general equilibrium models (DSGE). The main idea is to expand a solution in a series of powers of a small parameter scaling the uncertainty in the economy around a solution to the deterministic model, i.e. the model where the volatility of the shocks vanishes. If a deterministic path is global in state variables, then so are the constructed solutions to the stochastic model, whereas these solutions are local in the scaling parameter. Under the assumption that a deterministic path is already known the higher order terms in the expansion are obtained recursively by solving linear rational expectations models with time-varying parameters. The present work also proposes a method rested on backward recursion for solving general systems of linear rational expectations models with time-varying parameters and determines the conditions under which the solutions of the method exist.


1997 ◽  
Vol 82 (5) ◽  
pp. 1685-1693 ◽  
Author(s):  
Thierry Busso ◽  
Christian Denis ◽  
Régis Bonnefoy ◽  
André Geyssant ◽  
Jean-René Lacour

Busso, Thierry, Christian Denis, Régis Bonnefoy, André Geyssant, and Jean-René Lacour. Modeling of adaptations to physical training by using a recursive least squares algorithm. J. Appl. Physiol. 82(5): 1685–1693, 1997.—The present study assesses the usefulness of a systems model with time-varying parameters for describing the responses of physical performance to training. Data for two subjects who undertook a 14-wk training on a cycle ergometer were used to test the proposed model, and the results were compared with a model with time-invariant parameters. Two 4-wk periods of intensive training were separated by a 2-wk period of reduced training and followed by a 4-wk period of reduced training. The systems input ascribed to the training doses was made up of interval exercises and computed in arbitrary units. The systems output was evaluated one to five times per week by using the endurance time at a constant workload. The time-invariant parameters were fitted from actual performances by using the least squares method. The time-varying parameters were fitted by using a recursive least squares algorithm. The coefficients of determination r 2 were 0.875 and 0.879 for the two subjects using the time-varying model, higher than the values of 0.682 and 0.666, respectively, obtained with the time-invariant model. The variations over time in the model parameters resulting from the expected reduction in the residuals appeared generally to account for changes in responses to training. Such a model would be useful for investigating the underlying mechanisms of adaptation and fatigue.


2015 ◽  
Vol 9 (6) ◽  
pp. 568
Author(s):  
Ahmad Al-Jarrah ◽  
Mohammad Ababneh ◽  
Suleiman Bani Hani ◽  
Khalid Al-Widyan

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