Bounded rationality, monetary policy, and macroeconomic stability

Francisco Ilabaca, Greta Meggiorini and Fabio Milani

Economics Letters, 2020, vol. 186, issue C

Abstract: This paper estimates a Behavioral New Keynesian model to revisit the evidence that passive US monetary policy in the pre-1979 sample led to indeterminate equilibria and sunspot-driven fluctuations, while active policy after 1982, by satisfying the Taylor principle, was instrumental in restoring macroeconomic stability.

Keywords: Behavioral New Keynesian model; Cognitive discounting; Estimation under determinacy and indeterminacy; Taylor principle; Active vs passive monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 E58 E70 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Bounded Rationality, Monetary Policy, and Macroeconomic Stability (2019)
Working Paper: Bounded Rationality, Monetary Policy, and Macroeconomic Stability (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519302472

DOI: 10.1016/j.econlet.2019.07.007

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