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Are Non-Fundamental Equilibria Learnable in Models of Monetary Policy?

  • Seppo Honkapohja
  • Kaushik Mitra

Recent models of monetary policy can have indeterminacy of equilibria. The indeterminacy property is often viewed as a difficulty of these models. We consider its significance using the learning approach to expectations formation by employing expectational stability as a robustness criterion for different equilibria. We derive the expectational stability and instability conditions for forward-looking multivariate models, both with and without lags, that cover a wide range of monetary policies proposed in the literature.

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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 01/05.

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Handle: RePEc:yor:yorken:01/05
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