Publication detailsDamjanovic, T., Girdėnas, S. & Liu, K. (2015). Stationarity of econometric learning with bounded memory and a predicted state variable. Economics Letters 130: 93-96.
- Publication type: Journal Article
- ISSN/ISBN: 0165-1765
- DOI: 10.1016/j.econlet.2015.03.011
- Keywords: Econometric learning, Bounded memory, Random coefficient autoregressive process, Stationarity.
- Further publication details on publisher web site
- Durham Research Online (DRO) - may include full text
Author(s) from Durham
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.