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Adaptive learning, endogenous inattention, and changes in monetary policy

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

No 610, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

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: Monetary policy; Information theory (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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