Learning, inflation expectations and optimal monetary policy

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dc.contributor Suomen Pankki
dc.contributor.author Schaling, Eric
dc.date.accessioned 2014-09-22T07:58:28Z
dc.date.available 2014-09-22T07:58:28Z
dc.date.issued 2003
dc.identifier.isbn 952-462-075-8
dc.identifier.issn 0785-3572
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/7651
dc.description.abstract In this paper we analyse disinflation policy in two environments. In the first, the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector inflation expectations are generated; in the second, the central bank has to learn the private sector inflation forecasting rule.With imperfect knowledge, results depend on the learning scheme that is employed.Here, the learning scheme we investigate is that of least-squares learning (recursive OLS) using the Kalman filter.A novel feature of a learning-based policy as against the central bank's disinflation policy under perfect knowledge is that the degree of monetary accommodation (the extent to which the central bank accommodates private sector inflation expectations) is no longer constant across the disinflation, but becomes state-dependent.This means that the central bank's behaviour changes during the disinflation as it collects more information. Key words: learning, rational expectations, separation principle, Kalman filter, time-varying parameters, optimal control JEL classification numbers: C53, E43, E52, F33
dc.format.extent 49 s.
dc.language.iso eng
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject rahapolitiikka
dc.subject inflaatio
dc.subject informaatio
dc.subject rationaaliset odotukset
dc.subject oppiminen
dc.subject mallit
dc.subject kansantaloustiede
dc.subject SP
dc.subject epätäydellinen informaatio
dc.title Learning, inflation expectations and optimal monetary policy
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807421
dc.subject.jel C53
dc.subject.jel E43
dc.subject.jel E52
dc.subject.jel F33
dc.series.name Bank of Finland. Discussion papers
dc.series.year 2003
dc.series.number 20/2003
dc.series.sortingnumber 20
dc.date.publication 18.8.2003

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