Arbeitspapier
Escaping Nash inflation
Mean dynamics govern convergence to rational expectations equilibria of self-referential systems under least squares learning. We highlight escape dynamics that propel away from a rational expectations equilibrium under fixed-gain recursive learning schemes. These learning schemes discount past observations. In a model with a unique self-confirming equilibrium, we show that the destination of the escape dynamics is an outcome associated with government discovery of too strong a version of the natural rate hypothesis. That destination is not sustainable as a self-confirming equilibrium but is visited recurrently. The escape route dynamics cause recurrent outcomes close to the Ramsey (commitment) inflation rate in a model with an adaptive government.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Working Paper ; No. 23
- Klassifikation
-
Wirtschaft
Monetary Policy
Central Banks and Their Policies
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Cho, In-Koo
Sargent, Thomas J.
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2000
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Cho, In-Koo
- Sargent, Thomas J.
- European Central Bank (ECB)
Entstanden
- 2000
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