strongly on the steady state level around which the economy is fluctuating. If output is below the first best competitive … positive investment and demand effects move the economy in the direction of the efficient output and can therefore be welfare …

central bank has full information about the structure of the economy, including the adaptive learning mechanism. It takes the … economy adjusts after the regime change. Under our assumptions the transition is slow. We claim that some features of the … overall stability of the economy. To achieve this result optimal policy is conditional on the degree of perceived persistence …