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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

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

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

The term structure of expectations

Crump, Richard K.; Eusepi, Stefano; Mönch, Emanuel; … - 2021

Economic theory predicts that intertemporal decisions depend critically on expectations about future outcomes. Using the universe of professional survey forecasts for the United States, we document the behavior of the entire term structure of expectations for output growth, inflation, and the...

Persistent link: https://www.econbiz.de/10012660381

Forward guidance with unanchored expectations

Eusepi, Stefano; Gibbs, Chris; Preston, Bruce - 2021

We study zero interest-rate policy in response to a large negative demand shock when long-run expectations can fall over time. Because falling expectations make monetary policy less effective by raising real interest rates, the optimal forward guidance policy makes large front-loaded promises to...

Persistent link: https://www.econbiz.de/10012614064

Learning About Monetary Policy Rules When Long-Horizon Expectations Matter

Preston, Bruce J. - 2015

This paper considers the implications of an important source of model misspecification for the design of monetary policy rules: the assumed manner of expectations formation. Following a considerable literature on learning, it is assumed that private agents seek to maximize their objectives...

Persistent link: https://www.econbiz.de/10013032843

Forward Guidance with Unanchored Expectations

Eusepi, Stefano; Gibbs, Christopher; Preston, Bruce - 2021

Persistent link: https://www.econbiz.de/10013214045

Behavioral learning equilibria

Hommes, Cars H.; Zhu, Mei - 2013

Persistent link: https://www.econbiz.de/10010191433

Fundamental disagreement about monetary policy and the term structure of interest rates

Cao, Shuo; Crump, Richard K.; Eusepi, Stefano; Mönch, … - 2021 - Revised August 2021

Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds....

Persistent link: https://www.econbiz.de/10012249767

News-driven inflation expectations and information rigidities

Larsen, Vegard Høghaug; Thorsrud, Leif Anders; … - 2019 - This version: 20 February 2019

We investigate the role played by the media in the expectations formation process of households. Using a novel news-topic-based approach we show that news types the media choose to report on, e.g., fiscal policy, health, and politics, are good predictors of households' stated inflation...

Persistent link: https://www.econbiz.de/10012115086

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