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Learning, Uncertainty and Monetary Policy

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  • Pablo Garcia

Abstract

I present a New Keynesian model in which the central bank's anti-inflationary preferences change over time. Agents do not observe the current monetary regime, but rationally learn about it using Bayes theorem. The model reproduces the contractionary effects of monetary policy uncertainty shocks recently documented in the empirical literature. In addition, the model shows that learning reduces the effects of monetary policy on the economy by softening the link between fundamentals and equilibrium prices and allocations.

Suggested Citation

  • Pablo Garcia, 2022. "Learning, Uncertainty and Monetary Policy," Annals of Economics and Statistics, GENES, issue 145, pages 5-28.
    • Handle: RePEc:adr:anecst:y:2022:i:145:p:5-28
    DOI: https://doi.org/10.2307/48655900
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    Cited by:

    1. Kęstutis Peleckis, 2022. "Application of the Multicriteria Method Seeking to Assess Concentration, and Its Effects on Competition in the Manufacturing Sector," Sustainability, MDPI, vol. 14(19), pages 1-30, September.

    More about this item

    Keywords

    Monetary Policy; Uncertainty; Bayesian Learning;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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