We develop an estimated model of the U.S. economy in which agents form expectations by continually updating their … beliefs regarding the behavior of the economy and monetary policy. We explore the effects of policymakers' misperceptions of … and destabilized the economy. Had monetary policy reacted less aggressively to perceived unemployment gaps, inflation …

which the economy undergoes structural change and where private agents and the central bank possess imperfect knowledge … about the true structure of the economy. Policymakers follow an interest rate rule aiming to maintain price stability and to … minimize fluctuations of unemployment around its natural rate but are uncertain about the economy's natural rates of interest …