If a stochastically monotone aggregate of asymmetrically informed agents' expectations of a random variable is common information, then the agents must agree on their expectations. This result is applied to a model of an oligopolistic market where the firms have a common random component of...

The rational expectations equilibrium of a small open economy can be subject to indeterminacy if foreign monetary policy does not satisfy the Taylor principle. We study the implications of foreign-induced indeterminacy for the conduct of monetary policy in a small open economy. In the canonical...

In this paper we examine the effects of private agents being less than fully rational. We examine this in the context of monetary policy, where the Central Bank may have uncertain preferences either by choice or by necessity. The new feature is that we allow the public to react in two different...

In this Paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e. the central bank and private agents - who have different...

After reviewing the reasons to use solution methods in macroeconomics,this survey paper discusses diferent aspects relative to a rigorous use of the numerical output of such methods. Special attention is paid to suggestions that have been made to incorporate parameter uncertainty. Finally, the...

The paper demonstrates how the E–stability principle introduced by Evans and Honkapohja [2001] can be applied to models with heterogeneous and private information in order to assess the stability of rational expectations equilibria under learning. The paper extends already known stability...

Simulations are used to analyze welfare and market- and farm-level effects of making futures available to producers of a storable commodity. Key features of the model are the explicit consideration of dynamic impacts due to inventories, and of aggregate market effects associated with futures...

In this paper we analyse disinflation policy in two environments. In the first, the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector inflation expectations are generated; in the second, the central bank has to learn the private...

Rational expectations is typically taken to mean that, conditional on the information set and the relevant economic theory, the expectation formed by an economic agent should be equal to its mathematical expectation. This is correct only when actual inflation is “linear” in the aggregate...

This paper is an empirical investigation into the role of credit history in determining the spread on sovereign bank loans. It employs an error-in-variables approach used in rational-expectations-macro-econometrics to set up a structural model that links sovereign loan spreads to realized...