Expectations, Learning and Monetary Policy: An Overview of Recent Research
George Evans () and
Seppo Honkapohja ()
No 200802, CDMA Working Paper Series from Centre for Dynamic Macroeconomic Analysis
Expectations about the future are central for determination of current macroeconomic outcomes and the formulation of monetary policy. Recent literature has explored ways for supplementing the benchmark of rational expectations with explicit models of expectations formation that rely on econometric learning. Some apparently natural policy rules turn out to imply expectational instability of private agents?learning. We use the standard New Keynesian model to illustrate this problem and survey the key results about interest-rate rules that deliver both uniqueness and stability of equilibrium under econometric learning. We then consider some practical concerns such as measurement errors in private expectations, observability of variables and learning of structural parameters required for policy. We also discuss some recent applications including policy design under perpetual learning, estimated models with learning, recurrent hyperinflations, and macroeconomic policy to combat liquidity traps and deflation.
Keywords: Imperfect knowledge; learning; interest-rate setting; fluctuations; stability; determinacy. (search for similar items in EconPapers)
JEL-codes: E52 E31 D84 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed
Downloads: (external link)
Chapter: Expectations, Learning and Monetary Policy: An Overview of Recent Research (2009)
Working Paper: Expectations, Learning, And Monetary Policy: An Overview Of Recent Research (2008)
Working Paper: Expectations, Learning and Monetary Policy: An Overview of Recent Rersearch (2008)
Working Paper: Expectations, Learning and Monetary Policy: An Overview of Recent Research (2008)
Working Paper: Expectations, learning and monetary policy: an overview of recent research (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:san:cdmawp:0802
Access Statistics for this paper
More papers in CDMA Working Paper Series from Centre for Dynamic Macroeconomic Analysis School of Economics and Finance, Castlecliffe, The Scores, Fife, KY16 9AZ. Contact information at EDIRC.
Bibliographic data for series maintained by The School of Economics and Finance ().