Heterogenous information about the term structure, least-squares learning and optimal rules for inflation targeting

Show simple item record

dc.contributor Suomen Pankki
dc.contributor.author Schaling, Eric
dc.contributor.author Eijffinger, Sylvester
dc.contributor.author Tesfaselassie, Mewael
dc.date.accessioned 2014-09-22T07:58:14Z
dc.date.available 2014-09-22T07:58:14Z
dc.date.issued 2004
dc.identifier.isbn 952-462-168-1
dc.identifier.issn 0785-3572
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/7562
dc.description.abstract In this paper we incorporate the term structure of interest rates into a standard inflation forecast targeting framework.Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - ie central bank and private agents - who have different information sets about the future sequence of short-term interest rates.We analyse inflation forecast targeting in two environments.One in which the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector interest rate expectations are generated, and one in which the central bank has imperfect knowledge.In the case of imperfect knowledge, the central bank has to learn about private sector interest rate expectations, as the latter affect the impact of monetary policy through the expectations theory of the term structure of interest rates.Here, following Evans and Honkapohja (2001), the learning scheme we investigate is that of least-squares learning (recursive OLS) using the Kalman filter.We find that optimal monetary policy under learning is a policy that separates estimation and control.Therefore, this model suggests that the practical relevance of the breakdown of the separation principle and the need for experimentation in policy may be limited. Key words: learning, rational expectations, separation principle, Kalman filter, term structure of interest rates JEL classification numbers: C53, E43, E52, F33
dc.format.extent 47 s.
dc.language.iso eng
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject korkojen aikarakenne
dc.subject inflaatio
dc.subject tavoitteet
dc.subject rahapolitiikka
dc.subject oppiminen
dc.subject rationaaliset odotukset
dc.subject SP
dc.title Heterogenous information about the term structure, least-squares learning and optimal rules for inflation targeting
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807341
dc.subject.jel C53
dc.subject.jel E43
dc.subject.jel E52
dc.subject.jel F33
dc.series.name Suomen Pankin keskustelualoitteita
dc.series.year 2004
dc.series.number 23/2004
dc.series.sortingnumber 23
dc.date.publication 17.11.2004

Files in this item

Total number of downloads: Loading...

Files Size Format View
115418.pdf 233.4Kb PDF View/Open

This item appears in the following Collection(s)

Show simple item record