An Economy of Neural Networks: Learning from Heterogeneous Experiences

Understand

This paper proposes a new way to model behavioral agents in dynamic macro-financial environments.

• Agents are described as neural networks and learn policies from idiosyncratic past experiences.
• I investigate the feedback between irrationality and past outcomes in an economy with heterogeneous shocks similar to Aiyagari (1994).
• In the model, the rational expectations assumption is seriously violated because learning of a decision rule for savings is unstable.