This paper presents experimental evidence from a monetary sticky price economy in which output and inflation depend on expectations of future inflation. In the unique stationary rational expectations equilibrium (REE) nominal demand shocks cause output and inflation to be white noise. In the experimental sessions, however, output and inflation display strong persistence and regular cyclical pat...

I show that adding an overlapping generations structure to the canonical New Keynesian model can generate optimal inflation rate is significantly positive. In a baseline calibration of model, target comprised between 0.8% and 3.2% in annual terms. this framework, deviations from long-run price stability are because at which firms discount future profit flows naturally differs planner discounts ...

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...

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