Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy
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Date
2006-06-22
Authors
Branch, William A.
Evans, George W., 1949-
Carlson, John
McGough, Bruce
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon, Dept of Economics
Abstract
This paper develops an adaptive learning formulation of an extension to the Ball,
Mankiw and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker’s preferences for price vs. output stability, the learning process can converge to a new equilibrium in which both output and price volatility are lower.
Description
11 p.
Keywords
Optimal monetary policy, Bounded rationality, Economic stabilization, Adaptive learning