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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

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2846.

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Date of creation: Jun 2001
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Handle: RePEc:cpr:ceprdp:2846

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Keywords: Adaptive Learning; Monetary policy; Stability; Sunspots;

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