In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework.Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e. the central bank and private agents - who have different...

We analyze answers to household survey questions on whether the respondents' household income has changed in the past twelve months, and on whether the respondents expect their household income to change in the next twelve months. Both questions are answered on a discrete five points scale.The...

In Hens (1997), a new adjustment process is proposed for a setting with reopening spot and asset markets. He argues by means of an intemporal variant of Scarf's example that this process is more stable than the other processes, although in general it might be more stable or less stable. This...

In this paper we analyze disinflation in two environments.One in which the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector inflation expectations are generated, and one in which the central bank has to learn the private sector...

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework.We find that under flexible inflation targeting and uncertainty in the degree of persistence in the economy, allowing for active learning possibilities has e®ects on the...

Abstract: This paper models expectation formation by taking into account that agents produce heterogeneous expectations due to model uncertainty, informational frictions and different capacities for processing information. We show that there are two general classes of steady states within this...