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

Author(s): Seppo Honkapohja and Kaushik Mitra

Publication Date: June 2001

Keyword(s): Adaptive Learning, Monetary policy, Stability and Sunspots

Programme Area(s): International Macroeconomics

Abstract: 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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Bibliographic Reference

Honkapohja, S and Mitra, K. 2001. 'Are Non-Fundamental Equilibria Learnable in Models of Monetary Policy?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2846