Monetary policy and learning from the central bank's forecast

B-Tier
Journal: Journal of Economic Dynamics and Control
Year: 2011
Volume: 35
Issue: 1
Pages: 52-66

Score contribution per author:

2.011 = (α=2.01 / 1 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We examine the expectational stability (E-stability) of rational expectations equilibrium (REE) in a standard New Keynesian model in which private agents refer to the central bank's forecast in the process of adaptive learning. To satisfy the E-stability condition in this environment, the central bank must respond more strongly to the expected inflation rate than the extent to which the Taylor principle suggests. However, the central bank's strong reaction to the expected inflation rate raises the possibility of indeterminacy of the REE. In considering these problems, a robust policy requires responding to the current inflation rate to a certain degree.

Technical Details

RePEc Handle
repec:eee:dyncon:v:35:y:2011:i:1:p:52-66
Journal Field
Macro
Author Count
1
Added to Database
2026-01-26