 Managing Self-organization of Expectations through Monetary Policy: a Macro ExperimentTiziana Assenza, P. Heemeijer, Cars Hommes and Domenico Massaro Post-Print from HAL Abstract: The New Keynesian theory of inflation determination is tested in this paper by means of laboratory experiments. We find that the Taylor principle is a necessary condition to ensure convergence to the inflation target, but it is not sufficient. Using a behavioral model of expectation formation, we show how heterogeneous expectations tend to self-organize on different forecasting strategies depending on monetary policy. Finally, we link the central bank's ability to control inflation to the impact that monetary policy has on the type of feedback –positive or negative– between expectations and realizations of aggregate variables and in turn on the composition of subjects with respect to the type of forecasting rules they use. Keywords: Laboratory experiments; Monetary policy; Expectations; Taylor principle (search for similar items in EconPapers) Published in Journal of Monetary Economics, 2021, 117, pp.170-186. ⟨10.1016/j.jmoneco.2019.12.005⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03176273 DOI: 10.1016/j.jmoneco.2019.12.005 Access Statistics for this paper More papers in Post-Print from HAL |
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