Optimal monetary policy and model selection in a real-time learning environment

Federico Ravenna

Economics Letters, 2012, vol. 114, issue 3, 322-325

Abstract: We investigate how real-time parameter learning, optimal policies and the volatility of exogenous shocks affect the policymakers’ ability to distinguish across competing models of the economy. The detection speed of model misspecification depends only on the relative volatility of supply and demand shocks.

Keywords: Learning; Optimal monetary policy; Model misspecification; Business cycle (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:114:y:2012:i:3:p:322-325

DOI: 10.1016/j.econlet.2011.11.011

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