Are non-fundamental equlibria learnable in models of monetary policy?

Kaushik Mitra, S Honkapohja

    Research output: Contribution to journalArticlepeer-review

    37 Citations (Scopus)

    Abstract

    Recent models of monetary policy can have indeterminacy of equilibria. which is often viewed as a difficulty of these models. We consider the significance of indeterminacy using (he learning approach to expectations formation. We employ expeciational stability as a selection criterion for different equilibria and derive the expeciational stability and instability, conditions for forward-looking multivariate models. both without and with lags. The results are applied to several monetary policies. (C) 2004 Elsevier B.V. All rights reserved.

    Original languageEnglish
    Pages (from-to)1743-1770
    Number of pages28
    JournalJournal of Monetary Economics
    Volume51
    Issue number8
    DOIs
    Publication statusPublished - Nov 2004

    Keywords

    • adaptive learning
    • stability
    • sunspots
    • monetary policy
    • MULTIPLE-SOLUTION INDETERMINACIES
    • SUNSPOT EQUILIBRIA
    • RATIONAL-EXPECTATIONS
    • STEADY-STATE
    • STABILITY
    • RULES
    • INFLATION

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