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Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy

  • Wiliam Branch

    (University of Californis - Irvine)

  • John Carlson

    (Federal Reserve Bank of Cleveland)

  • George W. Evans

    ()

    (University of Oregon Economics Department)

  • Bruce McGough

    (Oregon State University)

This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker's preferences for price vs. output stability, the learning process can converge to a new equilibrium in which both output and price volatility are lower.

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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2006-6.

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Length: 11
Date of creation: 22 Jun 2006
Date of revision:
Handle: RePEc:ore:uoecwp:2006-6
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  1. William Branch & John Carlson & George W. Evans & Bruce McGough, 2006. "Monetary Policy, Endogenous Inattention, and the Volatility Trade-off," 2006 Meeting Papers 106, Society for Economic Dynamics.
  2. Laurence Ball & N Gregory Mankiw & Ricardo Reis, 2003. "Monetary Policy for Inattentive Economies," Economics Working Paper Archive 491, The Johns Hopkins University,Department of Economics.
  3. Ricardo Reis, 2005. "Inattentive Producers," NBER Working Papers 11820, National Bureau of Economic Research, Inc.
  4. repec:fip:fedfsp:y:2012:i:july2 is not listed on IDEAS
  5. George W. Evans & Seppo Honkapohja, 2002. "Adaptive Learning and Monetary Policy Design," University of Oregon Economics Department Working Papers 2002-18, University of Oregon Economics Department, revised 04 Mar 2004.
  6. Thomas Sargent & Noah Williams & Tao Zha, 2006. "The conquest of South American inflation," Working Paper 2006-20, Federal Reserve Bank of Atlanta.
  7. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  8. John C. Williams, 2012. "Monetary policy, money, and inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue july9.
  9. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  10. Lars E. O. Svensson, 2003. "What is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," NBER Working Papers 9421, National Bureau of Economic Research, Inc.
  11. Christopher D. Carroll, 2003. "Macroeconomic Expectations Of Households And Professional Forecasters," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 269-298, February.
  12. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
  13. Orphanides, Athanasios & Wieland, Volker, 1999. "Inflation zone targeting," Working Paper Series 0008, European Central Bank.
  14. Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, vol. 48(2), pages 337-368, August.
  15. Bennett T. McCallum, 2000. "The Present and Future of Monetary Policy Rules," NBER Working Papers 7916, National Bureau of Economic Research, Inc.
  16. Athanasios Orphanides, 2002. "Monetary policy rules and the Great Inflation," Finance and Economics Discussion Series 2002-8, Board of Governors of the Federal Reserve System (U.S.).
  17. repec:nbr:nberre:0126 is not listed on IDEAS
  18. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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