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LEARNING THE OPTIMAL BUFFER-STOCK CONSUMPTION RULE OF CARROLL

Published online by Cambridge University Press:  18 March 2013

Murat Yıldızoğlu*
Affiliation:
GREThA UMR CNRS 5113 and University of Bordeaux
Marc-Alexandre Sénégas
Affiliation:
GREThA UMR CNRS 5113 and University of Bordeaux
Isabelle Salle
Affiliation:
GREThA UMR CNRS 5113 and University of Bordeaux
Martin Zumpe
Affiliation:
GREThA UMR CNRS 5113 and University of Bordeaux
*
Address correspondence to: Murat Yıldızoğlu, GREThA (UMR CNRS 5113), Bordeaux University, Avenue Léon Duguit, F-33608 PESSAC Cedex, France; e-mail: yildi@u-bordeaux4.fr.

Abstract

This article questions the rather pessimistic conclusions of Allen and Carroll [Macroeconomic Dynamics 5 (2001), 255–271] about the ability of consumers to learn the optimal buffer-stock-based consumption rule. To this end, we develop an agent-based model in which alternative learning schemes can be compared in terms of the consumption behavior that they yield. We show that neither purely adaptive learning nor social learning based on imitation can ensure satisfactory consumption behavior. In contrast, if the agents can form adaptive expectations, based on an evolving individual mental model, their behavior becomes much more interesting in terms of its regularity and its ability to improve performance (which is a clear manifestation of learning). Our results indicate that assumptions on bounded rationality and on adaptive expectations are perfectly compatible with sound and realistic economic behavior, which, in some cases, can even converge to the optimal solution. This framework may therefore be used to develop macroeconomic models with adaptive dynamics.

Type
Articles
Copyright
Copyright © Cambridge University Press 2013 

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