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

Damjanovic, T.; Girdėnas, S.; Liu, K.

doi:10.1016/j.econlet.2015.03.011

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

Damjanovic, T.; Girdėnas, S.; Liu, K.

Authors

Professor Tatiana Damjanovic tatiana.damjanovic@durham.ac.uk
Professor

S. Girdėnas

K. Liu

Abstract

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.

Citation

Damjanovic, T., Girdėnas, S., & Liu, K. (2015). Stationarity of econometric learning with bounded memory and a predicted state variable. Economics Letters, 130, 93-96. https://doi.org/10.1016/j.econlet.2015.03.011

Journal Article Type	Article
Acceptance Date	Mar 11, 2015
Online Publication Date	Mar 19, 2015
Publication Date	May 1, 2015
Deposit Date	Apr 15, 2015
Publicly Available Date	Sep 19, 2016
Journal	Economics Letters
Print ISSN	0165-1765
Electronic ISSN	1873-7374
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	130
Pages	93-96
DOI	https://doi.org/10.1016/j.econlet.2015.03.011
Keywords	Econometric learning, Bounded memory, Random coefficient autoregressive process, Stationarity.
Public URL	https://durham-repository.worktribe.com/output/1434176

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Copyright 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.