Learning and International Transmission of Shocks
This paper studies the implications of adaptive learning in the modelling of inter-country linkages in a two-region MSG G-cubed model built on micro-founded behaviors of firms and households. The nature of the transmission process under rational expectations versus adaptive learning is explored. We investigate the propagation mechanism within and across borders for various shocks and policy changes within the United States: change in inflation target, fiscal policy, productivity shock, and rise...[Show more]
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