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EXPECTATIONS COORDINATION ON A SUNSPOT EQUILIBRIUM: AN EDUCTIVE APPROACH

Published online by Cambridge University Press:  07 January 2003

Gabriel Desgranges  and
Giorgio Negroni
Gabriel Desgranges
Affiliation:
University of Cergy-Pontoise
Giorgio Negroni
Affiliation:
Catholic University of Milan
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Abstract

We analyze expectations coordination on a stationary sunspot equilibrium (SSE) using an eductive approach in which agents forecast the forecasts of others. This approach is grounded in some common-knowledge assumptions. We show that two institutional contexts may be envisaged; we also distinguish between stationary and nonstationary beliefs. We show that the conditions for eductive stability depend mainly on whether stationarity of beliefs is imposed. We also prove the existence of eductively stable SSEs by means of the Poincaré–Hopf theorem and show that eductively stable SSEs exist in a neighborhood of some indeterminate steady states.

Keywords

Common KnowledgeCoordinationRational ExpectationsStationary Sunspot EquilibriumStrong Rationality
Type
Research Article
Information
Macroeconomic Dynamics , Volume 7 , Issue 1 , February 2003 , pp. 7 - 41
Copyright
© 2003 Cambridge University Press

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