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The Apprentice Wizard: Montetary Policy, Complexity And Learning

  • DOMENICO DELLI GATTI

    ()

    (Institute of Quantitative Methods and Economic Theory, Catholic University of Milan, Largo Gemelli1, I-20123, Milan, Italy)

  • EDOARDO GAFFEO

    ()

    (Department of Economics and CEEL, University of Trento, Via Inama 5, I-38100 Trento, Italy)

  • MAURO GALLEGATI

    ()

    (Department of Economics, Polytechnic University of Marche, Piaz.le Martelli 8, I-60121, Ancona, Italy)

  • ANTONIO PALESTRINI

    ()

    (Department of Law in Society and History, University of Teramo, Via Crucidi 122, I-64100 Teramo, Italy)

This paper investigates some central issues of monetary policy by offering a model in which a central bank tries to stabilize fluctuations in aggregate output and inflation in an adaptive complex economy. We resort to evolutionary algorithms to model the central bank behaviour under discretion, and confront the efficiency of discretion with the choice of full commitment to a fixed rule.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal New Mathematics and Natural Computation.

Volume (Year): 01 (2005)
Issue (Month): 01 ()
Pages: 109-128

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Handle: RePEc:wsi:nmncxx:v:01:y:2005:i:01:p:109-128
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  1. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  2. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April.
  3. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. G. Fagiolo & G. Dosi & R. Gabriele, 2004. "Matching, Bargaining, And Wage Setting In An Evolutionary Model Of Labor Market And Output Dynamics," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 157-186.
  5. Lawrence J. Christiano & Christopher Gust, 2000. "The expectations trap hypothesis," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 21-39.
  6. Arifovic, Jasmina, 2000. "Evolutionary Algorithms In Macroeconomic Models," Macroeconomic Dynamics, Cambridge University Press, vol. 4(03), pages 373-414, September.
  7. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  8. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  9. Xavier Gabaix, 2004. "Power laws and the origins of aggregate fluctuations," Econometric Society 2004 North American Summer Meetings 484, Econometric Society.
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