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Are non-fundamental equilibria learnable in models of monetary policy?

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  • Honkapohja, Seppo
  • Mitra, Kaushik

Abstract

Recent models of monetary policy can have indeterminacy of equilibria. The indeterminacy property is often viewed as a difficulty of these models. We consider its significance using the learning approach to expectations formation by employing expectational stability as a robustness criterion for different equilibria. We derive the expectational stability and instability conditions for forward-looking multivariate models, both with and without lags, that cover a wide range of monetary policies proposed in the literature.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 51 (2004)
Issue (Month): 8 (November)
Pages: 1743-1770

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Handle: RePEc:eee:moneco:v:51:y:2004:i:8:p:1743-1770

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Web page: http://www.elsevier.com/locate/inca/505566

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  1. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
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