Equilibrium Selection, Observability and Backward-stable Solutions∗
نویسندگان
چکیده
We examine robustness of stability under learning to observability of exogenous shocks. Regardless of observability assumptions, the minimal state variable solution is robustly stable under learning provided the expectational feedback is not both positive and large, while the nonfundamental solution is never robustly stable. Overlapping generations and New Keynesian models are considered and concerns raised in Cochrane (2011, 2017) are addressed. JEL Classifications: E31; E32; E52; D84; D83
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