Dynamic higher order expectations

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• dc.contributor.author Nimark, Kristofferca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:51:13Z
• dc.date.available 2017-07-26T10:51:13Z
• dc.date.issued 2007-10-01
• dc.date.modified 2017-07-23T02:12:11Z
• dc.description.abstract In models where privately informed agents interact, agents may need to form higher order expectations, i.e. expectations of other agents' expectations. This paper develops a tractable framework for solving and analyzing linear dynamic rational expectations models in which privately informed agents form higher order expectations. The framework is used to demonstrate that the well-known problem of the infinite regress of expectations identified by Townsend (1983) can be approximated to an arbitrary accuracy with a finite dimensional representation under quite general conditions. The paper is constructive and presents a fixed point algorithm for finding an accurate solution and provides weak conditions that ensure that a fixed point exists. To help intuition, Singleton's (1987) asset pricing model with disparately informed traders is used as a vehicle for the paper.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1118
• dc.identifier.uri http://hdl.handle.net/10230/550
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1118
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword dynamic higher order expectations
• dc.subject.keyword private information
• dc.subject.keyword asset pricing
• dc.subject.keyword Macroeconomics and International Economics
• dc.title Dynamic higher order expectationsca
• dc.type info:eu-repo/semantics/workingPaper