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Some evolutionary foundations for price level rigidity
Saint-Paul, Gilles - 2002
This paper shows that price rigidity evolves in an economy populated by imperfectly rational agents who experiment with alternative rules of thumb. In the model, firms must set their prices in face of aggregate demand shocks. Their payoff depends on the level of aggregate demand, as well as on...
Persistent link: https://www.econbiz.de/10011409938
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Managing Expectations
Lindstädt, René; Staton, Jeffrey K. - 2010
Followers of law, politics and business commonly relate stories of individuals who appear to predict an expected self-performance level below what they believe likely. Candidates, attorneys and firms sometimes seem to under-predict their own capacities. Insofar as individuals typically construct...
Persistent link: https://www.econbiz.de/10014047090
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Optimal monetary policy when agents are learning
Molnár, Krisztina; Santoro, Sergio - 2010
We derive the optimal monetary policy in a sticky price model when private agents follow adaptive learning. We show that this slight departure from rationality has important implications for policy design. The central bank faces a new intertemporal trade-off, not present under rational...
Persistent link: https://www.econbiz.de/10010271452
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Optimal Monetary Policy When Agents Are Learning
Molnár, Krisztina; Santoro, Sergio - 2006
Most studies of optimal monetary policy under learning rely on optimality conditions derived for the case when agents have rational expectations. In this paper, we derive optimal monetary policy in an economy where the Central Bank knows, and makes active use of, the learning algorithm agents...
Persistent link: https://www.econbiz.de/10010494352
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Long-term debt pricing and monetary policy transmission
Eusepi, Stefano; Giannoni, Marc Paolo; Preston, Bruce - 2012
Under rational expectations, monetary policy is generally highly effective in stabilizing the economy. Aggregate demand management operates through the expectations hypothesis of the term structure: Anticipated movements in future short-term interest rates control current demand. This paper...
Persistent link: https://www.econbiz.de/10009522772
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Interest rate rules and macroeconomic stability under heterogeneous expectations
Anufriev, Mikhail; Assenza, Tiziana; Hommes, Cars H.; … - 2009
and Hommes (1997). The stabilizing effect of different monetary policies depends on the ecology of forecasting rules, on … agents' sensitivity to differences in forecasting performance and on how aggressively the monetary authority sets the nominal …, expectations rule is part of the ecology of forecasting strategies. …
Persistent link: https://www.econbiz.de/10011378358
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Fiscal foundations of inflation : imperfect knowledge
Eusepi, Stefano; Preston, Bruce - 2013
This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks...
Persistent link: https://www.econbiz.de/10010202656
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Heterogeneous expectations, optimal monetary policy, and the merit of policy inertia : conference paper
Gasteiger, Emanuel - 2014
The design and analysis of optimal monetary policy is usually guided by the paradigm of homogeneous rational expectations. Instead, we examine the dynamic consequences of implementation strategies, when the actual economy features expectational heterogeneity. Agents have either rational or...
Persistent link: https://www.econbiz.de/10010489292
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Debt, Policy Uncertainty and Expectations Stabilization
Eusepi, Stefano - 2010
This paper develops a model of policy regime uncertainty and its consequences for stabilizing expectations. Because of learning dynamics, uncertainty about monetary and fiscal policy is shown to restrict, relative to a rational expectations analysis, the set of policies consistent with...
Persistent link: https://www.econbiz.de/10013138712
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Fiscal Foundations of Inflation : Imperfect Knowledge
Eusepi, Stefano - 2013
This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks...
Persistent link: https://www.econbiz.de/10013074021