Adaptive learning and monetary policy design

George William Evans () and Seppo Mikko Sakari Honkapohja ()

No 29/2002, Research Discussion Papers from Bank of Finland

Abstract: We review the recent work on interest rate setting, which emphasizes the desirability of designing policy to ensure stability under private agent learning. Appropriately designed expectations based rules can yield optimal rational expectations equilibria that are both determinate and stable under learning. Some simple instrument rules and approximate targeting rules also have these desirable properties. We take up various complications in implementing optimal policy, including the observability of key variables and the required knowledge of structural parameters. An additional issue that we take up concerns the implications of expectation shocks not arising from transitional learning effects.

Keywords: commitment; interest rate setting; adaptive learning; stability; determinacy; expectations shocks (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 (search for similar items in EconPapers)
Date: Written
View list of references View citations in EconPapers

Downloads: (external link)
http://www.bof.fi/NR/rdonlyres/76EA7C40-5C28-466C-B1EB-44CD277EA0F7/0/0229.pdf (application/pdf)

Related works:
Working Paper: Adaptive Learning and Monetary Policy Design (2004)
Working Paper: Adaptive learning and monetary policy design (2004)
Working Paper: Adaptive Learning and Monetary Policy Design (2003)
Journal Article: Adaptive learning and monetary policy design (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:hhs:bofrdp:2002_029

Access Statistics for this paper

More papers in Research Discussion Papers from Bank of Finland
Address: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Contact information at EDIRC.
Series data maintained by Minna Valkama ().