Time-varying policy rule under learning

Michele Berardi

Economics Letters, 2015, vol. 129, issue C, 25-28

Abstract: Previous literature has shown that, in a New Keynesian model, an expectations based policy rule induces E-stability of the fundamental equilibrium, while a fundamentals based one does not. We derive an alternative rule, based only on fundamentals, which can also achieve stability of equilibrium under learning. This policy has parameters that evolve over time and is adaptively learnable by the policymaker.

Keywords: Monetary policy; Expectations; Learning; E-stability (search for similar items in EconPapers)
JEL-codes: D84 E52 E58 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:129:y:2015:i:c:p:25-28

DOI: 10.1016/j.econlet.2015.02.001

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