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Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy

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

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

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: expectations; optimal monetary policy; bounded rationality; economic stability; adaptive learning. (search for similar items in EconPapers)
JEL-codes: D83 D84 E31 E52 (search for similar items in EconPapers)
Pages: 11
Date: 2006-06-22
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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