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Performance of monetary policy with internal central bank forecasting

  • Honkapohja, Seppo
  • Mitra, Kaushik

Recent models of monetary policy have analyzed the desirability of different optimal and ad hoc interest rules under the restrictive assumption that forecasts of the private sector and the central bank are homogenous. In this paper, we study the implications of heterogeneity in forecasts of the central bank and private agents for the performance of interest rules from the learning viewpoint. JEL Classification: E52, E31, D84

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Paper provided by European Central Bank in its series Working Paper Series with number 0127.

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Date of creation: Feb 2002
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Handle: RePEc:ecb:ecbwps:20020127
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  1. Kaushik Mitra & James Bullard, . "Learning About Monetary Policy Rules," Discussion Papers 00/41, Department of Economics, University of York.
  2. Orphanides, Athanasios, 2000. "The quest for prosperity without inflation," Working Paper Series 0015, European Central Bank.
  3. Woodford, M., 1999. "Optimal Monetary Policy Inertia.," Papers 666, Stockholm - International Economic Studies.
  4. Mitra, Kaushik, 2003. " Desirability of Nominal GDP Targeting under Adaptive Learning," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 197-220, April.
  5. William A. Brock & Patrick de Fontnouvelle, 1996. "Expectational Diversity in Monetary Economies," Working Papers 96-11-084, Santa Fe Institute.
  6. Evans, George W. & Honkapohja, Seppo & Marimon, Ramon, 2001. "Convergence In Monetary Inflation Models With Heterogeneous Learning Rules," Macroeconomic Dynamics, Cambridge University Press, vol. 5(01), pages 1-31, February.
  7. George W. Evans & Seppo Honkapohja, 2003. "Expectations and the Stability Problem for Optimal Monetary Policies," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 807-824.
  8. Honkapohja, Seppo & Mitra, Kaushik, 2004. "Are non-fundamental equilibria learnable in models of monetary policy?," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1743-1770, November.
  9. Evans, George W. & Honkapohja, Seppo, 2002. "Adaptive learning and monetary policy design," Research Discussion Papers 29/2002, Bank of Finland.
  10. In-Koo Cho & Noah Williams & Thomas J. Sargent, 2002. "Escaping Nash Inflation," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 1-40.
  11. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
  12. Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
  13. Svensson, Lars E O & Woodford, Michael, 2004. "Implementing Optimal Policy Through Inflation-Forecast Targeting," CEPR Discussion Papers 4229, C.E.P.R. Discussion Papers.
  14. Marimon, Ramon & Sunder, Shyam, 1993. "Indeterminacy of Equilibria in a Hyperinflationary World: Experimental Evidence," Econometrica, Econometric Society, vol. 61(5), pages 1073-107, September.
  15. R. Guesnerie, 2002. "Anchoring Economic Predictions in Common Knowledge," Econometrica, Econometric Society, vol. 70(2), pages 439-480, March.
  16. Brock, W.A., 1995. "A Rational Route to Randomness," Working papers 9530, Wisconsin Madison - Social Systems.
  17. Ben S. Bernanke & Michael Woodford, 1997. "Inflation Forecasts and Monetary Policy," NBER Working Papers 6157, National Bureau of Economic Research, Inc.
  18. Robert E. Hall & N. Gregory Mankiw, 1993. "Nominal Income Targeting," NBER Working Papers 4439, National Bureau of Economic Research, Inc.
  19. Carlstrom, Charles T. & Fuerst, Timothy S., 2004. "Learning and the central bank," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 327-338, March.
  20. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  21. Lars E. O. Svensson, 2003. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 426-477, June.
  22. Michael Woodford, 1996. "Control of the Public Debt: A Requirement for Price Stability?," NBER Working Papers 5684, National Bureau of Economic Research, Inc.
  23. Evans, George W & Honkapohja, Seppo, 1998. "Economic Dynamics with Learning: New Stability Results," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 23-44, January.
  24. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  25. Evans, George W. & Honkapohja, Seppo, 1999. "Learning dynamics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 7, pages 449-542 Elsevier.
  26. William Poole, 2002. "Flation," Speech 49, Federal Reserve Bank of St. Louis.
  27. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
  28. Chryssi Giannitsarou, 2003. "Heterogeneous Learning," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 885-906, October.
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