Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy

William A. Branch (), John Carlson (), George William Evans () and Bruce McGough ()

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

Abstract: This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker's preferences for price vs. output stability, the learning process can converge to a new equilibrium in which both output and price volatility are lower.

Keywords: expectations; optimal monetary policy; bounded rationality; economic stability; adaptive learning. (search for similar items in EconPapers)
JEL-codes: E52 E31 D83 D84 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2006-06-22
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Working Paper: Adaptive learning, endogenous inattention, and changes in monetary policy (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:ore:uoecwp:2006-6

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