Showing 1 - 10 of 54
A fundamentals based monetary policy rule, which would be the optimal monetary policy without commitment when private agents have perfectly rational expectations, is unstable if in fact these agents follow standard adaptive learning rules. This problem can be overcome if private expectations are...
Persistent link: https://www.econbiz.de/10010295698
Monetary policy is sometimes formulated in terms of a target level of inflation, a fixed time horizon and a constant interest rate that is anticipated to achieve the target at the specified horizon. These requirements lead to constant interest rate (CIR)instrument rules. Using the standard New...
Persistent link: https://www.econbiz.de/10010298248
Earlier studies of the seigniorage inflation model have found that the high-inflation steady state is not stable under adaptive learning. We reconsider this issue and analyze the full set of solutions for the linearized model. Our main focus is on stationary hyperinflationary paths near the...
Persistent link: https://www.econbiz.de/10010298287
An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. We study how different forms of heterogeneity in structure, forecasts and adaptive learning rules affect the conditions for convergence of...
Persistent link: https://www.econbiz.de/10011604166
Full commitment in monetary policy leads to equilibria that are superior to those from optimal discretionary policies. Different types of reactions functions to implement and instrument rules to approximate full commitment have been proposed in the literature. We assess optimal reaction...
Persistent link: https://www.econbiz.de/10011604170
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...
Persistent link: https://www.econbiz.de/10011604173
We study how the use of judgement or “add-factors” in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We isolate conditions under which new phenomena, which we call exuberance equilibria, can exist in standard macroeconomic...
Persistent link: https://www.econbiz.de/10011604601
Persistent link: https://www.econbiz.de/10011935636
We study a many country endogenous growth model in which decisions about innovation and new investment are influenced by growth expectations. Adaptive learning dynamics determine country-specific short run transition paths. Countries differ in basic structural parameters and may impose tariffs...
Persistent link: https://www.econbiz.de/10010274930
This paper considers the performance of average inflation targeting (AIT) policy in a New Keynesian model with adaptive learning agents. Our analysis raises concerns regarding robustness of AIT when agents have imperfect knowledge. In particular, the target steady state can be locally unstable...
Persistent link: https://www.econbiz.de/10012614217