Arbeitspapier
Adaptive learning and multiple equilibria in a natural rate monetary model with unemployment persistence
This paper demonstrates that the adaptive learning approach to modelling private sector expectations can be used as an equilibriumselection mechanism in a natural-rate monetary model with unemployment persistence.In particular, it is shown that only one of the two rational expectations equilibria is stable under least-squares learning, and that it is always the low-inflation equilibrium with intuitive comparative statics properties that is the learnable equilibrium.Hence, this paper provides a basic theoretical justification for focusing on the lowinflation equilibrium.Earlier contributions, in which the high-inflation equilibrium was ignored, mainly because of its unpleasant characteristics, are not theoretically satisfactory.
- ISBN
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952-462-098-7
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Discussion Papers ; No. 30/2003
- Classification
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Wirtschaft
Existence and Stability Conditions of Equilibrium
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Expectations; Speculations
Monetary Policy
- Subject
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adaptive learning
monetary policy
multiple equilibria
persistence
- Event
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Geistige Schöpfung
- (who)
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Rantala, Anssi
- Event
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Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
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2003
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Rantala, Anssi
- Bank of Finland
Time of origin
- 2003
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