Determinacy, Learnability, and Monetary Policy Inertia

James Bullard and Kaushik Mitra

Journal of Money, Credit and Banking, 2007, vol. 39, issue 5, 1177-1212

Abstract: We show how monetary policy inertia can help alleviate problems of indeterminacy and non-existence of stationary equilibrium observed for some commonly studied monetary policy rules. We also find that inertia promotes learnability of equilibrium. The context is a simple, forward-looking model of the macroeconomy widely used in the rapidly expanding literature in this area. We conclude that this might be an important reason why central banks in the industrialized economies display considerable inertia when adjusting monetary policy in response to changing economic conditions. Copyright 2007 The Ohio State University.

Date: 2007
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Working Paper: Determinacy, Learnability, and Monetary Policy Inertia (2004)
Working Paper: Determinacy, learnability, and monetary policy inertia (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:39:y:2007:i:5:p:1177-1212

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