Recent models of monetary policy have analysed the desirability of different optimal and ad hoc interest-rate rules under the restrictive assumption that forecasts of the private sector and central bank are homogeneous. In this paper, we study from a learning perspective the implications of...

Recent models of monetary policy have analyzed the desirability of different optimal and ad hoc interest rules under the restrictive assumption that forecasts of the private sector and the central bank are homogenous. In this paper, we study the implications of heterogeneity in forecasts of the...

An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. Various forms of structural heterogeneity can arise and we study the important case of economies in which agents' behavior depends on forecasts...

Since central banks have limited information concerning the transmission channel of monetary policy, they are faced with the difficult task of simultaneously controlling the policy target and estimating the impact of policy actions. A tradeoff between estimation and control arises because policy...

Inflation-targeting central banks have only imperfect knowledge about the effect of policy decisions on inflation. An important source of uncertainty is the relationship between inflation and unemployment. This paper studies the optimal monetary policy in the presence of uncertainty about the...

We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead...