A Bayesian DSGE Model with Infinite-Horizon Learning: Do "Mechanical" Sources of Persistence Become Superfluous?

Fabio Milani

No 60703, Working Papers from University of California-Irvine, Department of Economics

Abstract: This paper estimates a monetary DSGE model with learning introduced from the primitive assumptions. The model nests infinite-horizon learning and features, such as habit formation in consumption and inflation indexation, that are essential for the model fit under rational expectations. I estimate the DSGE model by Bayesian methods, obtaining estimates of the main learning parameter, the constant gain, jointly with the deep parameters of the economy. The results show that relaxing the assumption of rational expectations in favor of learning may render mechanical sources of persistence superfluous. In particular, learning appears a crucial determinant of inflation inertia.

Keywords: Infinite-horizon learning; DSGE model; Bayesian estimation; Non-rational expectations; Inflation persistence; Habit formation (search for similar items in EconPapers)
JEL-codes: C11 D84 E30 E50 E52 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-12
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.economics.uci.edu/files/docs/workingpapers/2006-07/Milani-03.pdf (application/pdf)

Related works:
Journal Article: A Bayesian DSGE Model with Infinite-Horizon Learning: Do "Mechanical" Sources of Persistence Become Superfluous? (2006)
Working Paper: A Bayesian DSGE Model with Infinite-Horizon Learning: Do "Mechanical" Sources of Persistence Become Superfluous? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:irv:wpaper:060703

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