Learning and Optimal Monetary Policy

Optimal monetary policy when agents are learning

Earlier research on optimal monetary policy under learning uses optimality conditions derived under rational expectations. In this paper instead, we derive optimal monetary policy when the central bank knows the algorithm followed by agents to form their expectations and makes active use of the learning behavior. There is a well known intratemporal tradeoff between inflation and output gap stab...

1 Optimal Monetary Policy

We re-examine optimal monetary policy when lump-sum taxes are unavailable. Under commitment, we show that, with alternative utility functions to that considered in Nicolini’s related analysis, the direction of the incentive to cheat may depend on the initial level of government debt, with low debt creating an incentive towards surprise deflation, but high debt the reverse. Under discretion, we ...

Optimal Monetary Stabilization Policy∗

Optimal Monetary Policy

This article studies optimal monetary policy when decision-makers in firms choose how much attention they devote to aggregate conditions. When the amount of attention that decision-makers in firms devote to aggregate conditions is exogenous, complete price stabilization is optimal only in response to shocks that cause efficient fluctuations under perfect information. When decision-makers in fir...

Monetary Policy and Learning

Federal Reserve Bank of Atlanta E C O N O M I C R E V I E W Third Quarter 2003 I t is a great pleasure to attend this conference on monetary policy and learning and enjoy the many excellent papers presented here. I am very grateful for the opportunity to speak to this distinguished audience of researchers and policymakers, and I hope my remarks will stimulate some further discussion. I will tal...