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Timothy Van Zandt
Professor of Economics
Working Paper
Lettau M., Van Zandt T. (2000). Robustness of Adaptive Expectations as an Equilibrium Selection Device. 2000/25/EPS
Dynamic models in which agents' behavior depends on expectations of future prices or other endogenous variables can have steady states that are stationary equilibria for a wide variety of expectations rules, including rational expectations. When there are multiple steady states, stability is a criterion for selecting among them as predictions of long-run outcomes.