This chapter investigates the implications of adaptive learning in the private sector's formation of inflation expectations for the conduct of monetary policy. We first review the literature that studies the implications of adaptive learning processes for macroeconomic dynamics under various...

A crucial challenge for economists is figuring out how people interpret the world and form expectations that will likely influence their economic activity. Inflation, asset prices, exchange rates, investment, and consumption are just some of the economic variables that are largely explained by...