Adaptive Learning and Monetary Policy Design

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

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: We review the recent work on interest rate setting, which emphasizes the desireability 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; expectations shocks (search for similar items in EconPapers)
JEL-codes: E52 E31 D84 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2002-11-08
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Related works:
Working Paper: Adaptive Learning and Monetary Policy Design (2003)
Working Paper: Adaptive learning and monetary policy design (2004)
Working Paper: Adaptive learning and monetary policy design (2002)
Journal Article: Adaptive learning and monetary policy design (2003)
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