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We analyze determinacy and stability under learning (E-stability) of rational expectations equilibria in the Blanchard … explaining unemployment instability. Under lagged data based rules the area where monetary policy delivers both determinacy and E …-based rules - unlike Bullard and Mitra (2002) - an additional explosive region is introduced. Here also the scope for determinacy …
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We assess the conditions under which an interest rate rule granting an explicit response to stock prices can shield the economy against endogenous aggregate instability in the form of fluctuations driven by self-fulfilling beliefs, and fundamental equilibria that are not learnable in the...
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