Near-Rational Exuberance

James Bullard and George Evans

No 465, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: We study how the use of judgement or add-factors in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods. We isolate conditions under which "exuberance equilibria" exist in standard macroeconomic environments. These equilibria may display sunspot-like behavior, but without a requirement that the underlying rational expectations equilibrium is indeterminate. We suggest ways in which monetary policymakers might avoid unintended outcomes by adjusting policy to minimize the risk of exuberance equilibria

Keywords: learning; judgement; indeterminacy; monetary policy (search for similar items in EconPapers)
JEL-codes: D84 E52 E61 (search for similar items in EconPapers)
Date: 2004
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Related works:
Working Paper: Near-Rational Exuberance (2006)
Working Paper: Near-Rational Exuberance (2005)
Working Paper: Near-rational exuberance (2005)
Working Paper: Near-rational exuberance (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:465

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