Rational vs. long-run forecasters: Optimal monetary policy and the role of inequality

Elton Beqiraj, Giovanni Di Bartolomeo () and Carolina Serpieri

No 129, CIMEO, Sapienza University of Rome from Department of Economics and Law, Sapienza University of Rome

Abstract: This paper builds a stylized simple sticky-price New Keynesian model where agents' beliefs are not homogeneous. We assume that agents choose optimal plans while considering forecasts of macroeconomic conditions over an infinite horizon. A fraction of them (boundedly rational agents) use heuristics to forecast macroeconomic variables over an infinite horizon. In our framework, we study optimal policies consistent with a second-order approximation of the policy objective from the consumers' utility function, assuming that the steady state is not distorted.

Date: 2017-01
New Economics Papers: this item is included in nep-mon and nep-upt
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: RATIONAL VS. LONG-RUN FORECASTERS: OPTIMAL MONETARY POLICY AND THE ROLE OF INEQUALITY (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:00129

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