Showing 31 - 40 of 286
Central bank communication plays an important role in shaping market participants' expectations. This paper studies a simple nonlinear model of monetary policy in which agents have incomplete information about the economic environment. It shows that agents' learning and the dynamics of the...
Persistent link: https://www.econbiz.de/10014214926
This paper addresses the output-price volatility puzzle by studying the interaction of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs....
Persistent link: https://www.econbiz.de/10014223070
This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw, and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker's preferences for price vs. output stability, the learning...
Persistent link: https://www.econbiz.de/10014223413
In this paper, we explore the determinants of newswire coverage of Federal Reserve (Fed) communications. Our sample covers all 344 forward-looking communications made in the period May 1999–May 2004. We find, first, that there is a higher likelihood of newswire coverage for monetary policy...
Persistent link: https://www.econbiz.de/10014156978
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/10014114944
I study the performance of forecast-based non-linear Taylor rules in a simple model where money enters in the production function and monetary policy is non-fully credible. The paper shows that there exist learnable sunspot equilibria close to the locally unique active (and learnable) steady...
Persistent link: https://www.econbiz.de/10014118516
A striking implication of the replacement of adaptive expectations by Rational Expectations was the "Lucas Critique," which showed that expectation parameters, and endogenous variable dynamics, depend on policy parameters. We consider this issue from the vantage point of bounded rationality,...
Persistent link: https://www.econbiz.de/10014119224
It is widely recognised that the market and the monetary authorities face a high degree of uncertainty about the appropriate models to use for policy decisions and forecasting. This paper reviews the main theoretical results of the literature on bounded rationality and discusses the implications...
Persistent link: https://www.econbiz.de/10014122479
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/10014075826
We study and measure uncertainty in the minutes of the meetings of the board of governors of the Central Bank of Mexico and relate it to monetary policy variables. In particular, we construct two uncertainty indices for the Spanish version of the minutes using unsupervised machine learning...
Persistent link: https://www.econbiz.de/10014076959