Mei Zhu

Shanghai Univeristy of Finance and Economics · Institute for Advanced Research & School of Economics

This paper shows that belief‐driven economic fluctuations are a general feature of many determinate macroeconomic models. In environments with hidden state variables, forecast‐model misspecification can break the link between indeterminacy and sunspots by establishing the existence of “statistical sunspots” in models that have a unique rational exp...

This paper shows that belief-driven economic fluctuations are a general feature of many determinate macroeconomic models. Model misspecification can break the link between indeterminacy and sunspots by establishing the existence of "statistical sunspots" in models that have a unique rational expectations equilibrium. Building on the insights of Mar...

We generalize the concept of behavioral learning equilibrium (BLE) to a general high dimensional linear system and apply it to the standard New Keynesian model. Boundedly rational agents learn to use a simple AR(1) forecasting rule for each variable with parameters consistent with the observed sample mean and autocor-relation of past data. Agents d...

We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and correctly forecast the unconditional sample mean and first-...

We propose a simple misspecification equilibrium concept and a behavioral learning process explaining excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and in equilibrium correctly forecast the unconditional sample mean and first-order sam-ple autocorrelati...

Existence and stability of stationary solutions of nonlinear random difference equa-tions are studied in this note. Firstly, we give the weak conditions that guarantee the stability of Lypanunov exponents under small random perturbations. Secondly, we find out the conditions under which the ratio of the random norm and the stan-dard Euclidean norm...

We investigate dynamical properties of a heterogeneous agent model with random dividends and further study the relationship between dynamical properties of the random model and those of the corresponding deterministic skeleton, which is obtained by setting the random dividends as their constant mean value. Based on our recent mathematical results,...

The market maker plays an important role in price formation, but his/her behavior and stabilizing impact on the market are relatively unclear, in particular in speculative markets. This paper develops a financial market model that examines the impact on market stability of the market maker, who acts as both a liquidity provider and an active invest...