Learning and International Transmission of Shocks

Warwick McKibbin, Kang Yong Tan

    Research output: Contribution to journalArticle


    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 in equity risk. Adaptive learning is found to change the short run sign of transmission in most cases but this also depends on the fraction of forward-looking agents in the economy.
    Original languageEnglish
    Pages (from-to)1033 - 1052
    JournalEconomic Modelling
    Publication statusPublished - 2009


    Dive into the research topics of 'Learning and International Transmission of Shocks'. Together they form a unique fingerprint.

    Cite this