Online ISSN 2286-0266
Print ISSN 1223-0685
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Gabriel BOBEICĂ
Academia de Studii Economice din Bucureşti
This paper presents a dynamic IS-LM model with evolutionary expectations. Agents in the model are heterogeneous, their expectations consisting in a population of chromosomes subjected to a genetic algorithm process that replicates imitation and perpetuation of success strategies, exchange of information and experimentation. The simulations conducted based on this model show that expectations implicitly modelled in this way converge to the equilibrium given by adaptive expectations. The convergence holds also when the growth rate of the money supply follows a Regime Switching process, but to a limit that depends on the variance of the shock in the money supply equation, on the memory of the performance function governing the survival of expectations and on the frequency and the direction of regime changes.

ŒCONOMICA no. 3/2015
Keywords: expectations formation, non-rational expectations, genetic algorithm, regime switching
JEL: C63, D84, E17
The Convergence of Evolutionary Expectations in a Dynamic IS-LM Model