A predictive multi-agent approach to model systems with linear rational expectations

Mostafavi, Moeen and Fatehi, Ali-Reza and Shakouri G., Hamed and Von zur Muehlen, Peter (2011): A predictive multi-agent approach to model systems with linear rational expectations. Forthcoming in:

Abstract

Expectation formation plays a principal role in economic systems. We examine and revise the standard rational expectations (RE) model, generally taken as the best paradigm for expectations modelling, and suggest a new method to model rational expectations. Conventional conditions that assert the stability and uniqueness of popular solution methods are shown to be insufficient. The agent-based new modelling approach suggested in this paper will be shown to lead to uniquely stable solutions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Rational expectation, Predictive control, Economics dynamic
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations ; Speculations; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis

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