Advanced Search
MyIDEAS: Login

Robust Learning Stability with Operational Monetary Policy Rules

Contents:

Author Info

  • George W. Evans
  • Seppo Honkapohja
Registered author(s):

    Abstract

    We consider “robust stability” of a rational expectations equilibrium, which we define as stability under discounted (constant gain) least-squares learning, for a range of gain parameters. We find that for operational forms of policy rules, i.e. rules that do not depend on contemporaneous values of endogenous aggregate variables, many interest-rate rules do not exhibit robust stability. We consider a variety of interest-rate rules, including instrument rules, optimal reaction functions under discretion or commitment, and rules that approximate optimal policy under commitment. For some reaction functions we allow for an interest-rate stabilization motive in the policy objective. The expectations-based rules proposed in Evans and Honkapohja (2003, 2006) deliver robust learning stability. In contrast, many proposed alternatives become unstable under learning even at small values of the gain parameter.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/cp0808.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Conference Paper Series with number 0808.

    as in new window
    Length:
    Date of creation:
    Date of revision:
    Handle: RePEc:san:cdmacp:0808

    Contact details of provider:
    Postal: Department of Economics, University of St. Andrews, Fife KY16 9AL
    Phone: 01334 462420
    Fax: 01334 462444
    Email:
    Web page: http://www.st-andrews.ac.uk/cdma
    More information through EDIRC

    Related research

    Keywords: Commitment; interest-rate setting; adaptive learning; stability; determinacy.;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:san:cdmacp:0808. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bram Boskamp).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.