Dear all,

we want to invite you to our next ECON Theory and Policy Seminar talk on

Monday, February 6, 2023 form 4:00-5:30pm (Seminarroom DB04 yellow, Freihaus Building, yellow area, 4^th floor)

Heterogeneous Experience and Constant Gain Learning (with John Duffy)

Mike Shin (University of Sydney) https://www.mikejshin.com/

Recent evidence suggests that learning agents may limit the history of data they use to form forecasts of inflation and other macroeconomic variables to lived experience (Malmendier and Nagel 2011, 2016).We connect this finding to the use of constant gain learning found in the literature on learning in macroeconomics. Specifically, we incorporate both heterogeneity in life-cycle horizons via the Blanchard-Yaari perpetual youth model and learning from experience (LfE) into a simple linear expectations model where agents die with some random probability every period. For learning from lived experience, agents implement a decreasing-gain learning approach using only observations within their own lifetime. We find that while at the individual level, agents are using decreasing-gain learning (DGL), at the aggregate level, expectations follow an approach that is related to constant-gain learning where instead the gain parameter is no longer free but tied to the probability of death. We provide a precise characterization of the relationship between constant-gain learning (CGL) and our model of perpetual youth learning(PYL) and show that PYL can well approximate CGL while pinning down the gain parameter with demographic data.

Further events: https://www.econ.tuwien.ac.at/index.html#events

Best regards,

Julia Hutter

for Alexia Fürnkranz-Prskawetz

Julia Hutter

TU Wien

Institute of Statistics and Mathematical Methods in Economics

Economics E105-3

Phone: +43-1-58801x10531

E-Mail: julia.hutter@tuwien.ac.at