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Stationarity of econometric learning with bounded memory and a predicted state variable.

Damjanovic, T. and Girdėnas, S. and Liu, K. (2015) 'Stationarity of econometric learning with bounded memory and a predicted state variable.', Economics letters., 130 . pp. 93-96.


In this paper, we consider a model where producers set their prices based on their prediction of the aggregated price level and an exogenous variable, which can be a demand or a cost-push shock. To form their expectations, they use OLS-type econometric learning with bounded memory. We show that the aggregated price follows the random coefficient autoregressive process and we prove that this process is covariance stationary.

Item Type:Article
Keywords:Econometric learning, Bounded memory, Random coefficient autoregressive process, Stationarity.
Full text:(AM) Accepted Manuscript
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Publisher statement:NOTICE: this is the author’s version of a work that was accepted for publication in Economics Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economics Letters, 130, May 2015, 10.1016/j.econlet.2015.03.011.
Date accepted:11 March 2015
Date deposited:20 April 2015
Date of first online publication:19 March 2015
Date first made open access:19 September 2016

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