Title: Non-convergence to Rational Expectations and Optimal Monetary Policy in Models with Learning
Abstract: A principal argument in the rational expectations literature is the optimality of predictable policy. This paper illustrates that this claim does not hold in a world of parametric uncertainty for two reasons: (1) completely noiseless policy may lead to non-convergence to the true model parameters; (2) highly predictable policy is not very informative about the structure of the model. A series of examples illustrate the ramifications for macroeconomic policy.
Publication Year: 1989
Publication Date: 1989-06-01
Language: en
Type: article
Indexed In: ['crossref']
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