dc.contributor.author |
Branch, William A. |
|
dc.contributor.author |
Carlson, John |
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dc.contributor.author |
Evans, George W., 1949- |
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dc.contributor.author |
McGough, Bruce |
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dc.date.accessioned |
2005-03-22T23:14:05Z |
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dc.date.available |
2005-03-22T23:14:05Z |
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dc.date.issued |
2004-12-07 |
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dc.identifier.uri |
http://hdl.handle.net/1794/662 |
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dc.description |
52 p. |
en |
dc.description.abstract |
This paper addresses the output-price volatility puzzle by studying the interaction of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs. Endogenous inattention is a Nash equilibrium in the information processing rate. Although a decline of policy activism directly increases output volatility, it indirectly anchors expectations, which decreases output volatility. If the indirect effect dominates then the usual trade-off between output and price volatility breaks down. This provides a potential explanation for the "Great Moderation" that began in the 1980's. |
en |
dc.format.extent |
531074 bytes |
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dc.format.mimetype |
application/pdf |
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dc.language.iso |
en_US |
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dc.publisher |
University of Oregon, Dept of Economics |
en |
dc.relation.ispartofseries |
University of Oregon Economics Department Working Papers ; 2004-19 |
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dc.subject |
Expectations |
en |
dc.subject |
Optimal monetary policy |
en |
dc.subject |
Bounded rationality |
en |
dc.subject |
Economic stabilization |
en |
dc.subject |
Adaptive learning |
en |
dc.title |
Monetary Policy, Endogenous Inattention, and the Volatility Trade-off |
en |
dc.type |
Working Paper |
en |